Retracing the evolutionary history of arthropods has been one of the greatest challenges in biology. During the past decade, phylogenetic analyses of morphological and molecular data have coalesced towards the conclusion that Mandibulata, the most diverse and abundant group of animals, is a distinct clade from Chelicerata, in that its members possess post-oral head appendages specialized for food processing, notably the mandible. The origin of the mandibulate body plan, however, which encompasses myriapods, crustaceans and hexapods, has remained poorly documented. Here we show that Tokummia katalepsis gen. et sp. nov., a large bivalved arthropod from the 508 million-year-old Marble Canyon fossil deposit (Burgess Shale, British Columbia), has unequivocal mandibulate synapomorphies, including mandibles and maxillipeds, as well as characters typically found in crustaceans, such as enditic, subdivided basipods and ring-shaped trunk segments. Tokummia and its closest relative, Branchiocaris (in Protocarididae, emended), also have an anteriormost structure housing a probable bilobed organ, which could support the appendicular origin of the labrum. Protocaridids are retrieved with Canadaspis and Odaraia (in Hymenocarina, emended) as part of an expanded mandibulate clade, refuting the idea that these problematic bivalved taxa, as well as other related forms, are representatives of the basalmost euarthropods. Hymenocarines now illustrate that the subdivision of the basipod and the presence of proximal endites are likely to have been ancestral conditions critical for the evolution of coxal and pre-coxal features in mandibulates. The presence of crustaceomorph traits in the Cambrian larvae of various clades basal to Mandibulata is reinterpreted as evidence for the existence of distinct ontogenetic niches among stem arthropods. Larvae would therefore have constituted an important source of morphological novelty during the Cambrian period, and, through heterochronic processes, may have contributed to the rapid acquisition of crown-group characters and thus to greater evolutionary rates during the early radiation of euarthropods.