Green algae living within gastrodermal cells of hydra photosynthetically incorporate C(11)O(2). About 10 percent of the carbon fixed by the algae is released to the hydra where it is assimilated into animal cell components The specific activity (counts per minute per microgram of protein nitrogen) of hydra animal tissue is 50 to 100 times greater than that of algae-free controls exposed to C(14)O(2). Analyses were facilitated by a new method for rapid separation of hydra tissue layers.