This light- and electron-microscope study of four species of Sphagnum reveals that stem elongation involves meristematic activities unique to the group and hitherto unrecognized. The internal tissue of the mature stem arises by the concerted activity of an apical (primary) and a subapical (secondary) meristem. The primary meristem comprises the immediate derivatives of the single apical cell. Following a small number of divisions, the primary derivatives differentiate into highly vacuolate parenchymatous cells with a storied arrangement. Subsequently, the large vacuoles are replaced by numerous small vacuoles and the cells then divide repeatedly, by transverse septa, producing files of about nine short cells. Finally, ninefold elongation of these secondary cells is responsible for extension growth of the main stem below the mature capitulum. An early step in primary differentiation is the confinement of pre-existing plasmodesmata to distinct pitted areas. Further enlargement of the cells during primary and secondary differentiation involves the thickening of non-pitted wall areas, followed by expansion and thinning out, while the pitted areas remain virtually unchanged. A cortical array of microtubules is regularly found in association with non-pitted wall areas, while the unexpanded pitted areas are associated with smooth endoplasmic reticulum showing continuity with desmotubules. Though sharing much the same cytology as the conducting cells in bryoid mosses, in terms of their development the central stem cells in Sphagnum are not homologous with those of other mosses. The unique mode of stem development may be an important factor in the ecological success of Sphagnum.