Recent seismic and tectonic activity in Rabaul Caldera, Papua New Guinea, suggests that magma is accumulating at a shallow depth beneath this partially submerged structure and that a new volcano may be developing. Changes in onshore elevation since 1971 (as much as 2 m on south Matupit Island) indicate that rapid and large-scale uplifts have occurred on the seafloor near the center of the caldera. The frequency of seismic events within the caldera has also increased during this period. Earthquake locations define an elliptical ring surrounding the center of this uplift within the caldera. A marine geophysical survey in 1982 by the U.S. Geological Survey's R/V "S.P. Lee" in Rabaul Caldera shows the development of a bulge in the seafloor near the center of the caldera. High-resolution seismic reflection profiles show that this bulge consists of two domal uplifts bounded and separated by two major north-south-trending fault zones. Deformed sediments overlie these zones; a prominent slump flanks the area of the bulge. Five major acoustic units were identified in the seismic reflection profiles: an acoustic basement and four sedimentary units consisting of irregularly layered, cross-layered, contorted, and well-layered sequences. The acoustic basement is probably composed of crystalline volcanic rocks, and the layered acoustic units are probably sediments, primarily ash deposited in different environments. The cross-layered, irregularly layered, and contorted units appear to have been deposited in a dynamic environment subjected to strong currents, seismicity, and/or mass wasting, while the well-layered units were deposited in a low-energy environment. Locally, well-layered sequences interfinger with the other sedimentary units, indicating a transitional environment that alternated between high-energy and low-energy depositional processes. A submarine channel cuts most of the acoustic units and appears to be the conduit for sediment transport out of the caldera; it occupies an older buried channel north of the caldera that is presently being exhumed. In the south, active erosion of well-layered sediments is taking place. What are believed to be several young volcanic cones also disrupt the depositional layers. We conclude that the bulge in the seafloor and the associated fault zones are a result of emplacement of magma at a shallow depth. Contorted sediment and slumps adjacent to the bulge are probably the result of uplift and seismic activity. The pattern of seismicity appears to reflect increased magma pressure at depth beneath the caldera floor. This activity may eventually lead to an eruption. ?? 1986.