An exfoliating substance elaborated by certain phage Group 2 staphylococci causes toxic epidermal necrolysis. Both in man and in the newborn mouse, intraepidermal cleavage is the predominant histologic feature following exposure to this toxin. Electron microscopic study of sequential biopsy specimens obtained from neonatal mice and from organ cultures of human skin revealed intercellular cleavage and cell separation. The extracellular nature of the exfoliative process was confirmed in several ways: (1) perfused tracers did not penetrate cells during cell separation; (2) cultured cells exposed to high doses of exfoliating fractions demonstrated no signs of injury; and (3) cleaved surfaces examined by scanning electron microscopy and surface replication demonstrated intact plasma membranes. When fractions capable of inducing exfoliation were applied to cultured keratinocytes or fibroblasts, sperm, or lymphocyte suspensions, and to human or mouse skin in vivo, they did not alter the distribution or intensity of concanavalin A binding, ruthenium red staining, pemphigus antibody binding, or HL-A surface antigens. Therefore, while the pathogenesis of staphylococcal toxic epidermal necrolysis involves intercellular cleavage, the molecular cell surface target remains unknown.