Wautersia eutropha, formerly known as Ralstonia eutropha, a gram-negative bacterium, accumulates polyhydroxybutyrate (PHB) as insoluble granules inside the cell when nutrients other than carbon are limited. In this paper, we report findings from kinetic studies of granule formation and degradation in W. eutropha H16 obtained using transmission electron microscopy (TEM). In nitrogen-limited growth medium, the phenotype of the cells at the early stages of granule formation was revealed for the first time. At the center of the cells, dark-stained "mediation elements" with small granules attached were observed. These mediation elements are proposed to serve as nucleation sites for granule initiation. TEM images also revealed that when W. eutropha cells were introduced into nitrogen-limited medium from nutrient-rich medium, the cell size increased two- to threefold, and the cells underwent additional volume changes during growth. Unbiased stereology was used to analyze the two-dimensional TEM images, from which the average volume of a W. eutropha H16 cell and the total surface area of granules per cell in nutrient-rich and PHB production media were obtained. These parameters were essential in the calculation of the concentration of proteins involved in PHB formation and utilization and their changes with time. The extent of protein coverage of the granule surface area is presented in the accompanying paper.