The structural basis of the permeability barrier in mammalian epidermis was examined by tracer and freeze-fracture techniques. Water-soluble tracers (horesradish peroxidase, lanthanum, ferritin) were injected into neonatal mice or into isolated upper epidermal sheets obtained with staphylococcal exfoliatin. Tracers percolated through the intercellular spaces to the upper stratum granulosum, where further egress was impeded by extruded contents of lamellar bodies. The lamellar contents initially remain segregated in pockets, then fuse to form broad sheets which fill intercellular regions of the stratum corneum, obscuring the outer leaflet of the plasma membrane. These striated intercellular regions are interrupted by periodic bulbous dilatations. When adequately preserved, the interstices of the stratum corneum are wider, by a factor of 5-10 times that previously appreciated. Freeze-fracture replicas of granular cell membranes revealed desmosomes, sparse plasma membrane particles, and accumulating intercellular lamellae, but no tight junctions. Fractured stratum corneum displayed large, smooth, multilaminated fracture faces. By freeze-substitution, proof was obtained that the fracture plane had diverted from the usual intramembranous route in the stratum granulosum to the intercellular space in the stratum corneum. We conclude that: (a) the primary barrier to water loss is formed in the stratum granulosum and is subserved by intercellular deposition of lamellar bodies, rather than occluding zonules; (b) a novel, intercellular freeze-fracture plane occurs within the stratum corneum; (c) intercellular regions of the stratum corneum comprise an expanded, structurally complex, presumably lipid-rich region which may play an important role in percutaneous transport.