The structure and development of galls caused by the heterobasidiomycete Biatoropsis usnearum on Usnea thalli are studied in detail using different microscopical techniques. The galls induced by this fungus are devoid of algae and composed of hyphae of both fungal symbionts. The parasite forms tremelloid haustoria primarily in the central part of the gall. Infections of the parasite start in the cortical layer of the host and induce growth of the host hyphae resembling those of the central cord. The galls include a large amount of intact Usnea hyphae, to some extent also in the uppermost parts of the gall. Mature galls are compared with those caused by other lichenicolous fungi. The investigations show that the anatomies of galls and interactions between host and parasite differ significantly in gall-forming lichenicolous fungi.