A 61 year-old man was diagnosed prior to surgery as having multiple carcinoids of the rectum. Postoperative histological examination revealed 52 carcinoids, 1-6 mm in diameter, invading the submucosal layer, and innumerable endocrine cell micronests, less than 0.1 mm in diameter, were present in the rectum. A careful examination revealed several argyrophil cell micronests "budding from" the basis of the glands. Most of the tumor cells showed a positive reaction for Grimelius stain and some immunoreactivities for GLI, PP, PYY, insulin and NSE by the PAP method. Moreover, PYY cell hyperplasia was detected in the rectal mucosa, markedly in the areas surrounding the carcinoids. The authors suggest that (initiative) progenitor cells may develop into these lesions due to unknown factors.