Wnt/Frizzled/ss-catenin-based signaling systems play diverse roles in metazoan development, being involved not only in the establishment of body axes in embryogenesis but also in regulating stem cell fate in mammalian post-embryonic development. We have studied the role the canonical Wnt cascade plays in stem cell fate determination in Hydractinia, a member of the ancient metazoan phylum Cnidaria, by analyzing two key molecules in this pathway, frizzled and ss-catenin, and blocking GSK-3. Generally, frizzled was expressed in cells able to divide but absent in post-mitotic, terminally differentiated cells such as nerve cells and nematocytes. Transcripts of frizzled were identified in all embryonic stages beginning with maternal transcripts in the oocyte. Following gastrulation and in the planula larva, frizzled expression concentrated in the central endodermal mass from which the first interstitial stem cells and their derivatives arise. In post-metamorphic development, high levels of frizzled transcripts were detected in interstitial stem cells. Activating downstream events of the Wnt-cascade in the post-metamorphic life phase by blocking GSK-3 with paullones induced recruitment of nematocytes and nerve cells from the pool of interstitial stem cells. Terminal differentiation was preceded by an initial burst of proliferation of frizzled-positive i-cells. In activated i-cells, ss-catenin appeared in the cytoplasm, later in the nucleus. It was subsequently again observed in the cytoplasm and eventually faded out during terminal differentiation. Our results suggest an ancient role of Wnt signaling in stem cell fate determination.