In the previous investigation, the saponification of naphthenic acid extractant system has been proved to be a process of the formation of a microemulsion of 14/0 type, and its full extraction of rare earths is a process of destruction of the W/O microemulsion. When NdCl3 is partially extracted with NaA (sodium naphthenate) secoctylalcohol-- kerosine-- water microemulsion system (ME), both the NdA3 and the NaA co-exist in the same organic phase. However,the formation mechanism of microemulsion containing neodymium has not been much studied. In this paper, 10 aliquots of fully saponificated extractants were equilibrated with various amounts of NdC13 solutions respectively, then ten organic phases with different extraction efficiencies of neodymium from 094 to 9094 were obtained. After extraction,the volume of neodymium containing organic phase increased by 5 to 4594, because of the transfer of water molecules. The appearance of these organic phase still remained clear and transparent. The average hydrodynamic radius of the drops were found to be 100-300 Angstrom by using light scattering techniques. The results give a direct evidence of the microemulsion formation in the organic phase. Their FT-IR spectra were measured with CaFa liquid cells utilizing a Nicolet 7199B FT-IR spectrometer. The presence of various amounts of water in the organic phases was clearly detected from the relative intensity changes of 1644 cm-I, which is assigned to the bending mode of 1110 molecules. Fig.1 shows the change of water contents to the percent extraction of neodymium. Comparsion with the FT-IR spectra, it is seen that the 1560 cm-1 peak of the full saponificated extractant is attributed to the asym. stretching vibration of COO′′′ group, it shifted to 1536 for 100% extration of Nd ions, indicating the formation of neodymium naphthenate (NdA ) from ionic sodium naphthenate. The sym. strethching vibration of COO′′′ located at 1406 cm-1, it shifted to 1408 cm in 45% Nd extration. and disappeared when the percentage extration of Nd3+ was larger than 50%, at the same time, the water content dropped sharply (Fig.1).These results suggested that a series of microemulsion containing Nd ions formed in these organic phases, at the transition region ( more than 50 percentage extration of neodymium), a morphological change of the W/0 dispersion system might occur.