Multicellular animals, which evolved about 700 to 1,000 myr ago, contain many of the genes found in yeast. Important for the evolution of multicellular animals were new pathways for intercellular signaling that regulated more complex physiological responses. Here we focus on the contribution to this process of lipophilic molecules that interact with nuclear receptors and the aryl hydrocarbon receptor, as well as enzymes that regulate the concentrations of these molecules. Both nuclear receptors and the aryl hydrocarbon receptor are found in invertebrates and vertebrates. We propose that environmental chemicals (xenobiotics) have been an important influence on the evolution of multicellular animals through a process involving the co-evolution of ligand-activated transcription factors and enzymes that detoxify xenobiotics. Indeed, this conversion of "xenobiotic swords" into "adaptive plowshares" contributed to the diverse physiology found in multicelluar animals. An important implication of this analysis is that enzymes as well as hormone receptors are vulnerable targets for endocrine disruptors. That is, some toxic chemicals act by inhibiting the enzymes that catalyze the formation or degradation of lipophilic signals, such as steroids, thus, disrupting hormone action.