We present a detailed analysis of the cell lineage of the tardigrade Thulinia stephaniae with a 4D-microscopy system (3D time-lapse recording). The recording, of the entire development from embryogenesis until hatching, allowed us to analyze the fate of single descendants from early blastomeres up to germ layer formation and tissue development. The embryo undergoes an irregular indeterminate cleavage pattern without early fate restriction. During gastrulation, mesodermal and endodermal precursors, and a pair of primordial germ cells migrate through a blastopore at the prospective position of the mouth. Our results are not consistent with earlier descriptions of mesoderm formation by enterocoely in tardigrades. The mesoderm in Thulinia stephaniae originates from a variable number of blastomeres, which form mesodermal bands that later produce the serial somites. The nervous system is formed by neural progenitor cells, which delaminate from the neurogenic ectoderm. Early embryogenesis of Thulinia stephaniae is highly regulative, even after laser ablations of blastomeres at the two- and four-cell stages 'normal' juveniles are formed. This has never been observed before for a protostome. Germ cell specification occurs late during development between the sixth and seventh cell generation. Comparing the development of other protostomes with that of the Tardigrada, which occupy a basal position within the Arthropoda, suggests that an indeterminate cleavage and regulatory development is not only part of the ground pattern of the Arthropoda, but probably of the entire Ecdysozoa.