Peptides serve as important signalling molecules in development and differentiation in the simple metazoan Hydra. A systematic approach (The Hydra Peptide Project) has revealed that Hydra contains several hundreds of peptide signalling molecules, some of which are neuropeptides and others emanate from epithelial cells. These peptides control biological processes as diverse as muscle contraction, neuron differentiation, and the positional value gradient. Signal peptides cause changes in cell behaviour by controlling target genes such as matrix metalloproteases. The abundance of peptides in (...) Hydra raises the question of whether, in early metazoan evolution, cell–cell communication was based mainly on these small molecules rather than on the growth‐factor‐like cytokines that control differentiation and development in higher animals. BioEssays 23:420–427, 2001. © 2001 John Wiley & Sons, Inc. (shrink)