The FORTRAN 77 subroutine package PENELOPE performs Monte Carlo simulation of electron-photon showers in arbitrary for a wide energy range, from 1 keV to several hundred MeV. Photon transport is simulated by means of the standard, detailed simulation scheme. Electron and positron histories are generated on the basis of a mixed procedure, which combines detailed simulation of hard events with condensed simulation of soft interactions. A simple geometry package permits the generation of random electron-photon showers in material systems consisting of homogeneous bodies limited by quadric surfaces, i.e. planes, spheres, cylinders, etc. This report is intended not only to serve as a manual of the simulation package, but also to provide the user with the necessary information to understand the details of the Monte Carlo algorithm. (Author) 108 refs.