Ascidian metamorphosis represents a powerful model for comparative work on chordate development that has remained largely unexplored. We isolated transcripts differentially expressed during metamorphosis in the ascidian Boltenia villosa by suppressive PCR subtractions of staged larval and juvenile cDNAs. We employed a series of three subtractions to dissect gene expression during metamorphosis. We have isolated 132 different protein coding sequences, and 65 of these transcripts show significant matches to GenBank proteins. Some of these genes have putative functions relevant to key metamorphic events including the differentiation of smooth muscle, blood cells, heart tissue and adult nervous system from larval rudiments. In addition, a significant fraction of the differentially expressed transcripts match identified genes from the innate immune system. Innate immunity confers a rapid response to pathogen-specific molecules and/or compromised self-tissues. The activation of innate immunity genes during metamorphosis may represent the programmed maturation of the adult immune system. In addition, this immune response may be necessary for phagocytosis and re-structuring of larval tissues. An innate immune-related inflammatory response may also underlie two waves of trans-epidermal blood cell migration that occur during the swimming larval period and immediately upon settlement. We characterized these trans-epidermal migrations and discovered that some migratory cells leave the animal entirely through an anterior tunnel in the tunic. We show that these cells are positioned to detect external settlement cues and hypothesize that the innate immune system may also be employed to detect and rapidly respond to environmental settlement cues.