Upon starvation or overcrowding, Caenorhabditis elegans interrupts its reproductive cycle and forms a specialised larva called dauer (enduring). This process is regulated by TGF-beta and insulin-signalling pathways and is connected with the control of life span through the insulin pathway components DAF-2 and DAF-16. We found that replacing cholesterol with its methylated metabolite lophenol induced worms to form dauer larvae in the presence of food and low population density. Our data indicate that methylated sterols do not actively induce the dauer formation but rather that the reproductive growth requires a cholesterol-derived hormone that cannot be produced from methylated sterols. Using the effect of lophenol on growth, we have partially purified activity, named gamravali, which promotes the reproduction. In addition, the effect of lophenol allowed us to determine the role of sterols during dauer larva formation and longevity. In the absence of gamravali, the nuclear hormone receptor DAF-12 is activated and thereby initiates the dauer formation program. Active DAF-12 triggers in neurons the nuclear import of DAF-16, a forkhead domain transcription factor that contributes to dauer differentiation. This hormonal control of DAF-16 activation is, however, independent of insulin signalling and has no influence on life span.