1. At short incubation times, and under suitable osmotic conditions, the lactose synthesized by Golgi-derived vesicles of rat mammary gland is 85-90% particulate. Evidence is presented for its occlusion within the lumen ofthe vesicles. 2. Ovalbumin is used as a bulky active-site inhibitor to show that the active site of lactose synthase lies on the inner face of the Golgi membrane. 3. Phlorrhizin and phloretin inhibit lactose synthesis by such vesicles, indicating the presence of a glucose-transport system. 4. The relationship of this topography to the synthesis of N-acetylneuraminyl-lactose and to the secretion of milk sugars is discussed.