Polycrystalline samples of tetragonal YBa2Cu3O6.25 were transformed into the superconducting orthorhombic phase by annealing in an oxygen atmosphere at temperatures ranging from 400–850°C and then slowly cooled to room temperature (15°C/h). Transmission electron microscopy (TEM) images of these samples and samples prepared in the usual way show layers of amorphous or highly disordered material, several 100 nm thick, at a large fraction of the grain boundaries. Also all samples contain 10–100 nm thick sheets of disordered material which lie in the a-b planes and tend to run through the entire crystal grain. In the a-b planes we also observe dislocation loops, particularly in the as-quenched tetragonal samples and stacking faults in the heat-treated samples. We also frequently observe set of twins with orthogonal habit planes within a crystal grain. We attribute the low critical current density in YBa2Cu3O7 to these planar faults and the disordered grain boundary regions, and discuss the TEM observations with reference to resistivity and inductive measurements.