The mesoderm of the sea urchin embryo conventionally is divided into two populations of cells; the primary mesenchyme cells (PMCs), which produce the larval skeleton, and the secondary mesenchyme cells (SMCs), which differentiate into a variety of cell types but do not participate in skeletogenesis. In this study we examine the morphogenesis of embryos from which the PMCs have been removed microsurgically. We confirm the observation of Fukushi (1962) that embryos lacking PMCs form a complete skeleton, although in a delayed fashion. We demonstrate by microsurgical and cell marking experiments that the appearance of skeletogenic cells in such PMC-deficient embryos is due exclusively to the conversion of other cells to the PMC phenotype. Time-lapse video recordings of PMC-deficient embryos indicate that the converting cells are a subpopulation of late-ingressing SMCs. The conversion of these cells to the skeletogenic phenotype is accompanied by their de novo expression of cell surface determinants normally unique to PMCs, as shown by binding of wheat germ agglutinin and a PMC-specific monoclonal antibody. Cell transplantation and cell marking experiments have been carried out to determine the number of SMCs that convert when intermediate numbers of PMCs are present in the embryo. These experiments indicate that the number of converting SMCs is inversely proportional to the number of PMCs in the blastocoel. In addition, they show that PMCs and converted SMCs cooperate to produce a skeleton that is correct in both size and configuration. This regulatory system should shed light on the nature of cell-cell interactions that control cell differentiation and on the way in which evolutionary processes modify developmental programs.