Phenol is not essential to acid-fast staining, for it will occur in the absence of phenol where such lipoid-soluble basic dyes as night blue, Victoria blue B or Victoria R are used; it is essential for acid-fast staining with water soluble basic dyes such as basic fuchsin. When phenol is added to the staining solution, such water soluble basic dyes behave in effect like their lipid-soluble counterparts. The loss of mycobacterial acid-fastness with carbol-fuchsin after bromination or chromation indicates that this phenomenon is related to the presence of unsaturated lipids in the bacterial cells. Within the cells these acid-fast lipids are bound in such a way that they are easily removed from all mycobacteria by hot dilute HCl; from leprosy bacilli alone they are easily removed with hot pyridine. From the results of various blocking reactions it appears that carboxyl and especially hydroxyl groups of these cellular lipids are essential to the acid-fast reaction of mycobacteria.