Cyst formation in a freshwater strain of the colonial freshwater choanoflagellate Desmarella moniliformis Kent (Protozoa: Choanoflagellida) has been studied with light and electron microscopy for the first time. Batch cultures inoculated with motile vegetative cells start to produce cysts within 3 days during the exponential phase of growth. Cyst production proceeds until in late stationary phase there is a preponderance of cysts. Transfer of cysts to fresh medium results in limited excystment. Encystment involves the production of electron-dense fibrillar wall material, firstly around the neck of the cell and then around the posterior end. As the wall material is deposited the neck of the cell elongates and the dictyosome rotates from the horizontal to vertical plane. The number of mitochondrial profiles seen in individual sections of cells increases. Finally the neck of the cell is retracted, the flagellum and collar tentacles are withdrawn, and the bottom of the neck of the cyst wall is sealed with a diaphragm of wall material. Excystment, which has not been observed directly, appears to involve the disruption of the wall at the base of the neck, the remainder of the cyst wall remains intact. Comparisons are made between encystment in Desmarella and cyst development in other protists.