Increasingly, sponges are being used as models for a wide range of biological systems. However, little is known about the reproductive biology of a group that has been shown to lack gonads or gonadal ducts. The development of gametes in the oviparous demosponge Chondrilla australiensis at Fremantle, Western Australia, was investigated using light microscopy and transmission electron microscopy over 5 years. Results indicate that C. australiensis is gonochoric and oviparous. Egg and sperm development were first apparent inside choanocyte chambers, with both types of gamete apparently developing from choanocytes. During egg development, large numbers of nurse cells appeared attached to eggs, with which they fused at the time of spawning. The origin of the nurse cells remains unclear, but they may also have a choanocyte origin. Eggs took 4 weeks to develop and sperm took approximately 2 weeks, during which time the nucleus condensed and the cytoplasm reduced. Mature sperm could occupy almost the entire matrix of fecund males and were not contained in cysts. Spawning occurred in late summer and autumn over a period of 4–5 days, when the tides were at the maximum height for the month.