In a previous paper (Eschrich and Steiner, 1967) we could show that 14C-labeled assimilates moved in the leptom cylinder of the stem of Polytrichum commune with a velocity of at least 32 cm per hour. The present paper deals with the structure and differentiation of the conducting system of the same species. The central core of hydroids, the water conducting tissue, is surrounded by the leptom cylinder. Embedded in this cylinder of parenchymatic cells are 8 longitudinal strands of leptoids, which are supposed to be the conducting cells for the long distance transport of assimilates. Leptoids differ from parenchyma cells in having oblique end walls. The leptoids originate from derivatives of the apical cell and differentiate in a basipetal direction. Leaf traces are composed of water conducting central cells, which are surrounded by parenchymatic cells, the socii on the abaxial side, the deuter on the adaxial side. A leaf trace entering the stem mostly contains 11 rows of central cell. Along the path of the leaf trace through the ground tissue to the axial conducting system, all central cells are eliminated except the middlemost cell, which eventually merges with the hydroids. The parenchymatic cells of the leaf trace are successively taken off by the ground tissue or they are eliminated. At the level with 4 central cells the leaf trace is devoid of socii and the remaing deuters may be connected with one or two leptoid strands by a group of cells, which is named leptoid bridge. The deuters and the cells of the leptoid bridge have the same oblique end walls as the leptoids. The whole structure shows that there exists only a loose connection between the axial conducting system and the leaf traces. © 1968 Springer-Verlag.