Microscopical observations of the development of adventitious shoots from stems of decapitated poinsettia (Euphorbia pulcherrima) were performed from specimens collected every other day from the time of decapitation to 26 days after decapitation. Adventitious shoots developed after 10-week-old plants were decapitated, leaving 12 leaves on the excised stem and developing axillary shoots were continuously removed. Anatomical observations were made on serial sections stained with safranin and alcian blue to locate sites of cellular differentiation for adventitious shoots. Two days after decapitation the first periclinal cell division was observed in cortical parenchyma cells just outside the phloem. Dedifferentiation and uneven cell divisions within the inner cortical tissue resulted in cone-shaped structures, which consisted of larger and smaller daughter cells. Eight days after decapitation, distinct bands of radially arranged, cone-shaped structures with a large cell derivative towards the epidermis (basal cell) and a small size cell towards the phloem were organized. At day 10 after decapitation, the first anticlinal cell divisions were observed within previously formed cone-shaped structures forming the future adventitious shoot primordia. Due to desiccation of the tissue at the stem excision point, a cleavage formed just outside the xylem. Adventitious shoots emerged through the cleavage area and were visible morphologically 20 days after decapitation. The close connection between the phloem tissue and the initial cells of the developing adventitious shoots provide evidence for the presence of a branching factor in the form of a phytoplasma in the regenerated adventitious shoots.