The congenital epulis (gingival granular cell tumor) is a rare lesion of unknown origin found only in newborn infants. Remarkable similarities are noted between this lesion and the adult granular cell tumor (myoblastoma) by both light and electron microscopy. An electron microscopic study of a lesion from the anterior mandibular ridge in a newborn male infant was performed. No Schwann cells, axon fibers, odontogenic elements, or any muscle cells could be found. Cytoplasmic features were similar to those in adult granular cell tumors. Cells which appeared to be in a transitional state, not yet true granular cells, were found juxtaposed to the vessels in the position of pericytes. Fine-structure details of these cells were consistent with pericytes. Cells of this type found farther from the vessels appeared more like the typical granular cells. The cells were filled with structures of the autophagic type devoid of normal cell organelles. These findings support the theory that these are nonneoplastic, degenerative, or reactive lesions arising from a mesenchymal cell, possibly the pericyte.