Cytoplasmic inclusions without bounding membranes were present in initial cells and epithallial cells of the crustose coralline alga Clathromorphum loculosum. Chloramine-T Schiff's and aniline blue-black procedures for selective staining of proteins gave positive reactions to the inclusions. Unusual layered structures were present in initial cells and basal epithallial cells, which were the cells involved in deposition of the proteinaceous inclusions. Some protein bodies had a banded matrix, suggesting that the layered structures were incorporated into the protein bodies. Epithallial filaments were three to five cells long, and most cells contained clusters of numerous tightly packed protein bodies with smooth surfaces and rounded or angular outlines. In contrast, protein bodies in terminal cells of the epithallial filaments appeared eroded: they were smaller, more widely separated, and had highly irregular surfaces. Protein bodies disappeared from terminal epithallial cells in advance of senescence and shedding of these cells. Given the ephemeral nature of epithallial cells, it is unlikely that protein bodies deposited in these cells have a storage function. A defensive function, such as is known for proteinase inhibitors, is proposed.