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Developmental failure of the peripheral nervous system to form myelin is advanced as the probable mechanism of a severe neuropathy in young child. The hypothesis evolved from evaluation of clinical, electromyographic, and muscle biopsy studies at 9 months and 51/2 years of age and electron microscopic and biochemical studies of the sural nerve at the latter age. The clinical state was characterized by loss of sensation to modalities, usually ascribed as transmitted by large myelinated axons; those carried by smaller axons being relatively preserved. Thus, at the age of 51/2 years, ataxia due to absent peripheral orientation was the chief deficit. Muscle strength was decreased but still remarkable considering the histologically confirmed absence of myelin in intramuscular nerves and extremely low conduction velocities (2 to 3 m/sec) at both ages. Histological and ultrastructural features of the intramuscular and sural nerves included almost total lack of myelin sheaths, good preservation of axons, and marked proliferation of Schwann cells and their basement membranes with onion-bulb formation. The morphological findings correlated well with the absence of cholesterol esters and the presence of the normal myelin lipids in extremely small amounts in the lipid study of the sural nerve.