Lymphoid tissue, immunity and erythropoiesis in bone marrow were studied in chickens which had received air cell applications of cyclophosphamide (Cy) between 16 and 18 days of their embryonic development. The bursae from the Cy-treated birds were reduced significantly in size, deficient in bursal follicles, and lacked lymphocytes. The agglutinin level of sheep red blood cells of birds treated with Cy (2 mg) as 16, 17 and 18-day embryos was significantly lower than controls. While these Cy-treated birds lacked IgG antibody to sheep red blood cells, about 50% of the Cy birds produced unspecific IgG. Cy treatment did not suppress the graft-versus-host response. Cy did not change the absolute number of lymphocytes, granulocytes or erythroid series of cells in the bone marrow but did eliminate plasma cells. Since some of the Cy-treated birds did not produce specific agglutinin but made Ig, one would have to conclude that the presence of the bursa was not obligatory for Ig synthesis, but that the bursal microenvironment may be a prerequisite for synthesis of specific antibody.