Hydra are remarkable because they are immortal. Much of immortality can be ascribed to the asexual mode of reproduction by budding, which requires a tissue consisting of stem cells with continuous self-renewal capacity. Emerging novel technologies and the availability of genomic resources enable for the first time to analyse these cells in vivo. Stem cell differentiation in Hydra is governed through the coordinated actions of conserved signaling pathways. Studies of stem cells in Hydra, therefore, promise critical insights of general relevance into stem cell biology including cellular senescence, lineage programming and reprogramming, the role of extrinsic signals in fate determination and tissue homeostasis, and the evolutionary origin of these cells. With these new facts as a backdrop, this review traces the history of studying stem cells in Hydra and offers a view of what the future may hold.