The development of a new species, Bacillidium vesiculoformis n. sp. (Microspora, Mrazekiidae), is described from the freshwater oligochaete Nais simplex (Oligochaeta, Naididae). Initial stages of parasite development consist of a monokaryotic merogony within a haemocyte of the intestinal blood sinus. The resulting hypertrophied haemocyte is attached to the chloragocytes of the sinus by fine cytoplasmic extensions with the sinus around the cell becoming greatly enlarged. The meronts within the haemocyte form diplokaryotic sporonts that undergo sporogenesis directly within the cytoplasm of the host cell. The infected cell becomes packed with spores and developmental stages, causing it dramatically to increase in size, eventually rupturing the oligochaete and cell. Sporogony appears to be disporoblastic. Released spores were observed to have an adhesive quality. Transmission studies conducted with mature spores failed to transmit the parasite horizontally although vertical transmission was observed. Phylogenetic analysis of the parasite demonstrated that B. vesiculoformis clustered with microsporidian parasites of bryozoa and two other microsporidians, Janacekia debaiseuxi and an unidentified Bacillidium sp.