Ascospore germination, thallus initiation, and areole and prothallus development in the lichen Rhizocarpon lecanorinum Anders were examined using light, fluorescence and scanning electron microscopy. The ascospore germ hyphae remain very short and do not form a prothallus-like mycelium. Instead, a compact soredium-like granule develops directly from sporeling contact with a compatible species of Trebouxia. Diffuse initial stages involving non-trebouxioid algae are lacking. The onset of thallus differentiation is marked by the deposition of rhizocarpic acid in an incipient cortical layer within the apical part of the granule. As pigmentation and cortex-formation transform this structure into a typical areole, radiating prothallus hyphae are simultaneously initiated from its basal margin. Most areoles formed subsequently in the marginal prothallus lack subtending melanized hyphae and apparently stem from overgrowth by the prothallus of photobiont cells on, or in, the substratum. Apothecia reach maturity in thalli as small as 2 mm in diameter. It is proposed that the lack of diffuse hyphal growth in sporelings and telescoped morphogenesis of R. lecanorinum are part of a life history strategy geared to precocious, heavy investment in ascospore production. The R. lecanorinum–Trebouxia symbiosis has a number of features which make it well-suited for further studies of the life history and development of prothallus-forming crustose lichens with sexually reproducing mycobionts.