The interstitial cells of hydra form a multipotent stem cell system, producing terminally differentiated nerve cells and nematocytes during asexual growth. Under well-fed conditions the interstitial cell population doubles in size every 4 days. We have investigated the possible role of nerve cells in regulating this behavior. Nerve cells are normally found in highest concentrations in the head region of hydra, while interstitial cells are primarily located in the body column. Our experimental approach was to construct, by grafting, animals in which the density of nerve cells varied in (1) the head region, or (2) the body column. The growth of the interstitial cell population was then measured in these hydra. The results indicate that differences in head nerve cell density are closely correlated with how fast the interstitial cell population increases in size. Variations in the level of either nerve cells or interstitial cells in the body column showed no such correlation. These findings suggest the existence of a signaling mechanism in the head region. This signal, which is a function of the density of head nerve cells, emanates from the head tissue and exerts global control on the growth of the interstitial cell population in the body column.