We have screened a Hydra cDNA library for sequences encoding N-terminal signal peptides using the yeast invertase secretion vector pSUC [Jacobs et al., 1997. A genetic selection for isolating cDNAs encoding secreted proteins. Gene 198, 289-296]. We isolated and sequenced 907 positive clones; 88% encoded signal peptides; 12% lacked signal peptides. By searching the Hydra EST database we identified full-length sequences for the selected clones. These encoded 37 known proteins with signal peptides and 40 novel Hydra-specific proteins with signal peptides. Localization of two signal peptide-containing sequences, VEGF and ferritin, to the secretory pathway was confirmed with GFP fusion proteins. In addition, we isolated 105 clones which lacked signal peptides but which supported invertase secretion from yeast. Isolation of plasmids from these clones and retransformation in invertase-negative yeast cells confirmed the phenotype. A GFP fusion protein of one such clone encoding the foot morphogen pedibin was localized to the cytoplasm in transfected Hydra cells and did not enter the ER/Golgi secretory pathway. Secretion of pedibin and other proteins lacking signal peptides appears to occur by a non-classical protein secretion route.