We have investigated the mechanism of an evolutionary change in ascidian muscle cell differentiation. The ascidians Molgula oculata and Molgula occulta are closely related species with different modes of development. M. oculata embryos develop into conventional tadpole larvae with a tail containing striated muscle cells, whereas M. occulta embryos develop into tailless larvae with undifferentiated vestigial muscle cells. The muscle actin gene MocuMA1 was isolated from an M. oculata genomic library. MocuMA1 is a single-copy, larval-type muscle actin gene which appears to lack introns. However, the 5' upstream region of MocuMA1 is sufficient to drive expression of a lacZ fusion construct in the larval muscle cells, implying that it is a functional gene. MocuMA1 mRNA first appears in the prospective muscle cells of M. oculata embryos during gastrulation, and transcripts continue to be present throughout embryogenesis. Muscle actin mRNA was not detected during M. occulta embryogenesis, although the same probe was capable of detecting muscle actin mRNA in more distantly related ascidian species with tail muscle cells. Interspecific hybrids produced by fertilizing M. occulta eggs with M. oculata sperm recover the ability to express muscle actin mRNA in the vestigial muscle cells, suggesting that trans-acting factors responsible for muscle actin gene expression are conserved in M. occulta. The presence of these trans-acting factors was confirmed by showing that the MocuMA1/lacZ fusion construct is expressed in the vestigial muscle cells of M. occulta larvae. The orthologous larval muscle actin genes MoccMA1a and MoccMA1b were isolated from a M. occulta genomic library. The coding regions of these genes contain deletions, insertions, and codon substitutions that would make their products nonfunctional. Although the 5' upstream regions of the M. occulta muscle actin genes also contain numerous changes, expression of MoccMA1a/lacZ and MoccMA1b/lacZ fusion constructs showed that they both retain specific promoter activity, although it is reduced in MoccMAlb. The results suggest that the regression of muscle cell differentiation is mediated by changes in the structure of muscle actin genes rather than in the trans-acting regulatory factors required for their expression.