Pairings between certain combinations of homokaryotic strains of Stereum spp. give rise, following immigration of non-self nuclei, to extensive zones of appressed, degenerative mycelium. Aerial, crystalline filaments, up to 35 m wide and ⩾ 6 cm long, emerge from this mycelium at localized foci which appear to act as sinks for mycelial resources. The filaments are shown to be the bicyclic tertiary alcohol, ( + )-torreyol. The larger filaments are aggregations of elongated sub-units which generally spiral steeply around the longitudinal axis and extend independently and apically, even when exposed to the atmosphere. Re-crystallization of (+)-torreyol from organic solvents or by sublimation results in patterns resembling those of mycelial morphogenesis in both shape and size. Novel proteins are produced in the degenerate mycelium, in which the combination of nuclear but not mitochondrial DNA restriction fragment length polymorphisms from both progenitors is demonstrated. Subcultures and basidiospore-derived progeny from the degenerate mycelium exhibit marked developmental variation and instability.