The structure and ultrastructure of the microvascular bed of fatty bone marrow and the relationships of this vascular bed to endosteal bone surfaces was studied in adult beagles. The vascular volume of fatty bone marrow, as demonstrated by India ink-gelatin perfusion, appears less than the vascular volume of red bone marrow. The capillaries in fatty bone marrow are found between the large fat cells in a loose reticular connective tissue and have a continuous endothelial lining and basal lamina. Capillaries are frequently found adjacent to bone surfaces in these fatty marrow sites, yet are separated from these surfaces by very thin bone-lining cells. The nuclei of bone-lining cells are often found near these capillaries. The association of bone-lining cells to the microvasculature suggests that these cells may play a role in partitioning the extracellular fluids from the bone.