AbstractHydra has been well known for over 200 years for its remarkable regenerative capacity. In addition to small pieces excised from the body, reaggregates of dissociated single cells can also regenerate. Although the cellular events involved in the regeneration process have been well characterized, the underlying molecular mechanisms are yet to be uncovered. Recently, however, transcription factors and signaling molecules, both proteins and short peptides, have been identified and their role suggested in patterning and morphogenesis. In this article, a regeneration study at the tissue level is first described and then the importance of epithelial cells in regeneration is stressed. Finally, the recent study on morphogenetic peptides derived from epithelial cells is reviewed. Developmental Dynamics 226:182–189, 2003. © 2003 Wiley‐Liss, Inc.