The fine structural development of rat fetal liver sinusoids from 10 to 22 days gestation was studied. Colloidal carbon (Pelikan ink) was injected into 14‐22 day gestation fetuses via the umbilical vein to assess the continuity of the sinusoidal lining and the phagocytic ability of the developing lining cells. Endothelial cells, devoid of an underlying basal lamina, form the bulk of the vascular lining at all gestational ages. These cells possess typical intercellular junctions and fenestrae with diaphragms before 17 days gestation. Transendothelial open fenestrations, typical of the adult liver, appear around 17 days gestation, increasing in number for the remainder of gestation. Although fenestrae possessing diaphragms are permeable to carbon before 16 days gestation, open fenestrations, first seen at 17 days gestation, allowed large amounts of carbon to reach the extravascular space. Endocytosis of carbon by endothelial cells was accomplished exclusively by large bristle‐coated vesicles. Endothelial cells were also seen to be involved in transmural diapedesis of newly formed erythrocytes and megakaryocyte processes from the extravascular space by forming a temporary migration pore allowing these cells and processes to enter the circulation. At the end of gestation, blood‐forming activity had nearly ceased, and only the space of Dissé separated the lining cells from the parenchymal cells. Kupffer cells were easily identified as early as 13 days gestation by their content of phagosomes and engulfed erythrocytes. The Kupffer cells are much more avid in the phagocytosis of carbon than are endothelial cells. Toward the end of gestation, some Kupffer cells develop a homogeneous “sticky coat” to carbon.