The contents of selected hydrolytic enzymes of oil-induced peritoneal, normal alveolar, and BCG-induced alveolar macrophages have been studied. On a per cell or nitrogen basis the normal alveolar cells contained considerably more acid phosphatase, cathepsin, acid ribonuclease, lysozyme, and lipase than peritoneal cells. The BCG-induced alveolar macrophage exhibited increased levels of acid phosphatase, lysozyme, and lipase as compared to alveolar macrophages from unstimulated rabbits. The morphological differences between these cells was discussed and electron micrographs of the BCG-induced macrophage presented. Fractionation of the BCG-induced macrophage by differential centrifugation showed that 60 to 80 per cent of the total cell content of acid phosphatase, cathepsin, beta glucuronidase, acid ribonuclease, acid deoxyribonuclease, aryl sulfatase, lysozyme, and lipase were localized in a postnuclear fraction which sedimented at 15,000 g. This fraction also contained the majority of the mitochondria as evidenced by its content of cytochrome oxidase. Non-specific esterase was not localized to this fraction. A separation of the hydrolase-containing particles and mitochondria was achieved by isopycnic sucrose gradient centrifugation. Under the conditions employed, the mitochondria distributed at densities of 1.19 to 1.20, whereas the hydrolase particles sedimented to a density of 1.26 to 1.27. Each of the hydrolases including acid phosphatase, beta glucuronidase, cathepsin, lysozyme, and acid ribonuclease exhibited maximum activities in the same gradient fraction. The isolated granules exhibited enzymatic latency, and activation could be achieved by cycles of freezing and thawing or surface active agents. The majority of each of the hydrolytic enzymes could be liberated in a non-particulate form by mechanical trauma. Macrophages which had been stained supravitally with neutral red were fractionated by differential and gradient centrifugation. More than 70 per cent of the dye could be recovered in the particulate hydrolase fraction. The isolated, stained granules resembled those seen in the intact cell.