The ultrasonic echo back-scattered by blood fluctuates as a function of time delay and lateral displacement of the source-receiver. This granular echo is not due to any special structure in the blood on the scale observed, but probably arises from fluctuation scattering by the random distribution of red cells; the dimensions of the ultrasonic pulse determine the scale of fluctuation detected. A statistical diffraction theory is developed, and formulae derived for the mean relative echo envelope Pi , and the mean rates of fluctuation Ni and NR of the envelope about its mean as the time delay and lateral displacement are varied. Ni and NR agree reasonably with experiment, but Pi is in error by a factor of thirteen; this discrepancy is discussed, and possible explanations suggested.