The neuronal tracer DiI is a lipophilic dye which diffuses along the lipid bilayer of membranes and sometimes will move transcellularly. We used this tracer to study the development of olivocochlear synapses in the auditory system in rats and chickens by applying DiI directly to severed axons in the olivocochlear bundle. Observations with epi-fluorescent microscopy showed that DiI had labelled efferent axons directly and had labelled spiral ganglion cells and hair cells transneuronally. Ultrastructural analysis of photoconverted DiI tissue in rats revealed that transneuronal diffusion occurred when the plasma membrane of directly labelled axons made contact with the plasma membrane of their target structure. Directly and transneuronally labelled profiles can be distinguished easily at the electron microscopic level. In directly labelled profiles, all plasma, nuclear, endoplasmic reticulum, and outer mitochondrial membranes and cell cytoplasm are labelled leaving only the mitochondrial matrix unstained. However, in transneuronally labelled cells the endoplasmic, nuclear, and immature synaptic membranes are labelled but mitochondrial and non-synaptic plasma membranes are not labelled. This labelling pattern can be explained by diffusion through continuous membranes. These characteristics make DiI diffusion a powerful technique for identifying and studying early events in neuronal development and synapse formation. (C) 1997 Elsevier Science B.V.