During sperm maturation in the brushtailed possum, Trichosurus vulpecula, cytoplasmic droplets are shed from maturing spermatozoa in the distal regions of the head of the epididymis. Examination of luminal contents from various regions of the epididymis showed that the proportion of detached droplets in the luminal contents was reduced from about 45% in the proximal corpus epididymidis to less than 10% in the distal corpus and cauda epididymides. In contrast, the proportion of droplet-free spermatozoa increased from about 45% to more than 90% in the luminal contents. Disappearance of detached cytoplasmic droplets from the lumen was found to be associated with a region of specialized principal cells lining Regions 6 and 7 of the epididymis which selectively sequester and phagocytose free droplets from the luminal milieu. The luminal surfaces of these cells are characterized by a complex system of interdigitating processes which appear as waves of microfolds . These processes contrast with the stereocilia which cover the luminal surfaces of principal cells in adjacent, nonphagocytic regions of the duct. Cytoplasmic droplets are phagocytosed with their limiting membrane intact and gradually become condensed as they are transported deeper into the cell. Membrane lamellae are gradually compacted, transformed into concentrically arranged membrane stacks and then condensed into small electron-dense vesicles, which are probably degraded by the epithelial cells. The presence of a specific recognition factor on cytoplasmic droplets is suggested by the observation that phagocytic principal cells are able to selectively remove detached cytoplasmic droplets from the lumen in the presence of sperm-associated droplets and spermatozoa.