Placodes and neural crests represent defining features of vertebrates, yet their relationship remains unclear despite extensive investigation1-3. Here we use a combination of lineage tracing, gene disruption and single-cell RNA-sequencing assays to explore the properties of the lateral plate ectoderm of the proto-vertebrate, Ciona intestinalis. There are notable parallels between the patterning of the lateral plate in Ciona and the compartmentalization of the neural plate ectoderm in vertebrates4. Both systems exhibit sequential patterns of Six1/2, Pax3/7 and Msxb expression that depend on a network of interlocking regulatory interactions4. In Ciona, this compartmentalization network produces distinct but related types of sensory cells that share similarities with derivatives of both cranial placodes and the neural crest in vertebrates. Simple genetic disruptions result in the conversion of one sensory cell type into another. We focused on bipolar tail neurons, because they arise from the tail regions of the lateral plate and possess properties of the dorsal root ganglia, a derivative of the neural crest in vertebrates5. Notably, bipolar tail neurons were readily transformed into palp sensory cells, a proto-placodal sensory cell type that arises from the anterior-most regions of the lateral plate in the Ciona tadpole6. Proof of transformation was confirmed by whole-embryo single-cell RNA-sequencing assays. These findings suggest that compartmentalization of the lateral plate ectoderm preceded the advent of vertebrates, and served as a common source for the evolution of both cranial placodes and neural crest3,4.