Previous cytological evidence provides grounds for the view that heterokaryosis may well be of common occurrence in fungi, especially of the Fungi imperfecti. Previous genetical evidence shows that, so long as they are in cytoplasmic connexion, the genetically unlike nuclei of a heterokaryon can co-operate in action so that a heterokaryon can survive and grow in the laboratory on a medium which would be fatal to homokaryons, pure for the individual nuclei. It has been shown that Penicillium commonly occurs wild in the form of heterokaryons enjoying an advantage in growth rate over the homokaryons which can be extracted from them. These wild heterokaryons are not, however, stable on all media, presumably because they do not enjoy an advantage in all circumstances. Heterokaryon no. 4 breaks down on a minimal medium but can be resynthesized on more natural media containing 10% apple pulp or 2% malt extract. The properties of this heterokaryon were investigated by estimating the numerical ratio of the two kinds of nucleus. Estimates were made by plating out the uninucleate spores they produce and classifying the single spore colonies so obtained as homokaryon 4A or 4B. A critical survey of the plating technique employed showed that these estimates could be biased by differences in recoverability of the spores, depending on a number of factors such as the concentration of spores per plate. These effects have been either standardized throughout the estimations or measured and suitable corrections applied to the results obtained. The nuclear ratios of the heterokaryons have been shown to alter characteristically with the medium. Thus, for example, on 10% apple medium the ratio 4A:4B was 1:11 while on a medium containing only 20 parts of this 10% apple pulp to 80 of minimal medium it was 1:6. A correlation has been demonstrated between the nuclear ratio of the heterokaryon and the comparative growth rates of its two component homokaryons on the same medium. Variation in nuclear ratio thus affords a means of immediate somatic adjustment to a new food supply or of progressive adjustment to a changing one. These results serve to demonstrate heterokaryosis in wild Penicillium as a system of limited somatic variation and adaptation well suited to the needs of a saprophytic fungus living on various and often changing substrates. In such a system immediate variation no longer depends on the sexual cycle which, presumably for this reason, has been lost from imperfect fungi such as Penicillium. The loss of the sexual cycle must, however, lead by its abolition of gene recombination to a lack of genetical plasticity which may be expected to be fatal in the long run. Heterokaryosis thus takes its place with other variants of the sexual system in being of immediate advantage to its possessor, under the latter's special circumstances, but doomed in the evolutionary sense by the rigidity resulting from the sacrifice of gene recombination within nuclei. The somatic flexibility of a heterokaryon arises from the substitution of a flexible physiological control over nuclear behaviour expressed through the cytoplasm, for the rigidity of mechanical control experienced by genes within a common nucleus. In this form of control it resembles other systems of cellular adaptation depending on various types of cytoplasmic particles. The view is put forward that although dikaryons of heterothallic Basidiomycetes fall under the general heading of heterokaryons, they differ from the wild heterokaryons of Penicillia both in their past evolution and present function.