Ammonium ions added in large quantity disappear rapidly from the reservoir of the sheep placenta perfused in situ through the umbilical vessels. Ammonium ions are removed from the reservoir of perfused sheep fetal livers of 108-141 days of conceptual age at a rate of at least 1 mumol/min/g liver. The majority appears as urea. There is little or no change in glutamine concentration. Hepatic carbamoylphosphate synthetase I, ornithine transcarbamylase, argininosuccinate synthetase, argininosuccinase and arginase are present, even at 97 days of conceptual age, in adequate amounts to account for the observed urea production. With the exception of arginase, all levels rise with fetal age. The levels in the maternal liver are comparable with those at 106 days of conceptual age. Arginase is high in the younger fetuses, falls progressively with fetal age and is very low in the mother. It is concluded that (a) the perfused placenta is permeable to ammonia and the placenta may be able to clear ammonia from the fetal circulation at a rate comparable with that of fetal liver; (b) the fetal liver converts ammonia to urea at a rate comparable with the urea production of the fetus; (c) there is virtually no glutamine production by the fetal liver; (d) adequate amounts of the enzymes of urea synthesis are present even in the immature fetal liver to account for the total urea production of the fetus, and (e) the anomalously low arginase level in the maternal liver may conserve maternal arginine, and the high levels in the younger fetuses may be related to fetal polyamine production from maternally derived arginine.