Peripheral nerve biopsies from 4 borderline tuberculoid (BT) and 4 lepromatous (LL) patients who were on multidrug therapy were investigated by light and electron microscopic studies. The variation of diameters and distribution of myelinated and unmyelinated fibers between BT and LL patients were not significant. This study has shown significant changes in peripheral nerves and endoneural blood vessels. It was revealed that besides Schwann cells (SC), the endothelial cells (EC) of endoneural blood vessels frequently harbor M. leprae. In BT, peripheral nerves in addition to the degenerative changes of SC and presence of perineural and perivascular cuffing by mononuclear cells, the endoneurial blood vessels showed thickening of basement membrane with hypertrophy of EC leading to narrowing or complete occlusion of lumen. On the other hand, peripheral nerves of LL patients were infiltrated with large number of M. leprae shown to be present in the electron transparent zone (ETZ) of the SC. The EC of endoneurial blood vessels were found to be loaded with M. leprae, and this bacillary loaded EC was found to release M. leprae into the lumen through its ruptured membrane.