The observations and theoretical interpretations of galactic $\gamma$ rays in the energy region 10$^7$--10$^{10}$ eV are reviewed. Galactic $\gamma$ rays consist of a diffuse component and radiation from discrete sources. The diffuse component, which is formed as the result of interaction of cosmic rays with interstellar gas, reflects the large-scale structure of the Galaxy. Recent observations have revealed the existence of a belt of molecular hydrogen at a distance 4--8 kpc from the Galactic Center and indicate a nonuniformity of the distribution of cosmic rays over the disk and in the halo of the Galaxy. Information on the small-scale structure of the Galaxy in the $\gamma$ region is obtained from the discrete $\gamma$-ray sources, of which more than twenty have now been observed. The best known of these are the pulsars in the Crab Nebula, Vela-X, Cygnus X-3, and the region of the Galactic Center. Possible mechanisms for the $\gamma$ radiation of discrete sources are discussed.