Descriptive studies of phoronid development have concluded that the mesoderm of these animals originates from the endoderm during gastrulation. This interpretation has been tested by labeling one blastomere of 4- through 16-cell embryos and examining the position and germ layers occupied by the labeled clones of cells in the larva. No 2 injections gave rise to identical clones of cells, suggesting that the cleavage program does not generate cells of unique identity and that cell fates are established at later developmental time points. In many cases, a relatively large sector composed of ectodermal cells was labeled. When these labeled cells were adjacent to the mouth or anus of the larva, muscle and mesenchyme cells originated from the labeled clones. Under these circumstances, nerve cells also originated from these labeled sectors. These labeling studies also showed that endodermal cells can give rise to mesodermal and neural cells. These results suggest that nerve and muscle cells are induced to form at ectodermal-endodermal boundaries from both germ layers. These marking experiments also confirmed the observation that nerve cells originate both from the apical organ and the trunk region and show for the first time that the intestine originates by ingression of posterior ectoderm.