This report describes the retrograde degeneration affecting olfactory sensory neurons of rats after severance of their axons and illustrates the reconstitution of new neurons originating from stem cells located at the base of the olfactory neuroepithelium. Degeneration of the mature, axotomized neurons, signalled by an increased electron density of their cytoplasmic matrix and by the appearance of lipofuscin-like granules, can be detected in the neuroepithelium as early as 24 h after surgery and becomes conspicuous between the second and the third day. Degenerating neurons can be observed in decreasing number up to the tenth post-operative day. They are removed by macrophages which invade the epithelium. The reconstitution of new neurons begins to occur after eight days, when the stem cells undergo vigorous mitotic activity and differentiate into neurons. The morphology of the reconstituted neurons has been described in detail at different stages of their maturation. After 30 days, the olfactory epithelium appears similar to controls. On the basis of both morphological (in rats) and autoradiographic ( in mice) observations, the basal cells have been recognized as stem cells of the olfactory neurons.