Peptides are increasingly attracting attention as primary signals in the control of development. Even though a large number of peptides have been characterized in cnidarians, little experimental evidence addresses their endogenous role. The life cycle of Hydractinia echinata includes metamorphosis from planula larva into the adult stage of the polyp. This process of stage conversion includes internal signalling, which controls cell cycle activity, cell differentiation, cell death and proportion-controlled morphogenesis. LWamide peptides are considered to be part of the control system. We implemented methods to silence gene activity by dsRNAi in Hydractinia and show a substantial knock-down of LWamide gene activity. In addition, LWamide function was knocked-out pharmacologically by targeting the biosynthesis of amidated peptides and thus preventing functional LWamides. Here we show that extinction of bioactive LWamides from planulae causes loss of metamorphosis competence, a deficiency which can be rescued by synthetic LWamide peptides. Thus, it is shown that LWamides are indispensable and act by conveying outer metamorphosis stimuli to target cells within the animal. Considering non-availability of genetic analysis and the so-far limited success in expressing transgenes in hydroids, gene functions are difficult to analyse in hydroids. The approach as outlined here is suitable for functional analysis of genes encoding amidated peptides in hydroids.