A gene encoding a receptor protein-tyrosine kinase closely related to the vertebrate insulin receptor has been identified in the Cnidarian Hydra vulgaris. The gene is expressed in both epithelial layers of the adult polyp. A particularly high level of expression is seen in the ectoderm of the proximal portions of the tentacles and in a ring of ectodermal cells at the border between the foot basal disk and body column. The expression pattern of the gene in asexual buds is dynamic; expression is high throughout the newly emerging bud but the area of high expression becomes restricted to the apex as the bud lengthens. When the bud begins hypostome and tentacle formation, a high level of expression appears at the bases of the emerging tentacles. Finally, a ring of high expression appears just above the foot of the bud, completing the pattern seen in the adult polyp. The presence of this receptor and its pattern of expression suggested that an endogenous molecule related to insulin plays a role in regulating cell division in the body column and in differentiation of the tentacle and foot cells in Hydra, with the switch between the two being determined by the level of the receptor. Treatment of Hydra polyps with mammalian insulin caused an increase in the number of ectodermal and endodermal cells undergoing DNA synthesis.