Passage of electric current across rabbit gall-bladder, which is preferentially permeable to cations, causes water flow towards the negative electrode, as expected for electroosmosis in a cation-selective membrane. Current passage also causes development of a "polarization potential difference", i.e. a transepithelial potential difference (p.d.) which transiently remains after cessation of current flow and decays back to zero with a half-time of 22 to 90 sec. The polarization p.d. is due to current-induced local changes of salt concentration in unstirred layers, mainly at the serosal face of the epithelium. These changes originate through the so-called transport-number effect. Calculation shows that much of the observed current-induced water flow represents an osmotic flow due to these local concentration changes, rather than representing true electroosmosis. By implication, a large component of streaming potentials in the gall-bladder is a boundary diffusion potential, owing to water flow producing local changes of salt concentration in unstirred layers.