The low-molecular weight proportion altering factor (PAF) from colonial hydroids has general animalizing effects on morphogenesis in hydroid development. On the cellular level, the factor stimulates the formation of nerve cells in several developmental stages of Hydractinia echinata. Treatment during metamorphosis yielded a fivefold increase in the number of nerve cells with FMRF-amide-like immunoreactivity. In non-metamorphosing planula larvae, PAF triggered the differentiation of nerve cells that normally develop only upon initiation of metamorphosis and that occur in the polyp stage. After post-metamorphic treatment of young primary polyps, nerve cell numbers increased to 2.5 times the normal value.