Galls are plant tissues whose development is induced by another organism for the inducer's benefit. 30,000 arthropod species induce galls, and in most cases the inducing effectors and target plant systems are unknown. Cynipid gall wasps are a speciose monophyletic radiation that induce structurally complex galls on oaks and other plants. We used a model system comprising the gall wasp Biorhiza pallida and the oak Quercus robur to characterise inducer and host plant gene expression at defined stages through the development of galled and ungalled plant tissues, and tested alternative hypotheses for the origin and type of galling effectors and plant metabolic pathways involved. Oak gene expression patterns diverged markedly during development of galled and normal buds. Young galls showed elevated expression of oak genes similar to legume root nodule Nod factor-induced early nodulin (ENOD) genes and developmental parallels with oak buds. In contrast, mature galls showed substantially different patterns of gene expression to mature leaves. While most oak transcripts could be functionally annotated, many gall wasp transcripts of interest were novel. We found no evidence in the gall wasp for involvement of third-party symbionts in gall induction, for effector delivery using virus-like-particles, or for gallwasp expression of genes coding for plant hormones. Many differentially and highly expressed genes in young larvae encoded secretory peptides, which we hypothesise are effector proteins exported to plant tissues. Specifically, we propose that host arabinogalactan proteins and gall wasp chitinases interact in young galls to generate a somatic embryogenesis-like process in oak tissues surrounding the gall wasp larvae. Gall wasp larvae also expressed genes encoding multiple plant cell wall degrading enzymes (PCWDEs). These have functional orthologues in other gall inducing cynipids but not in figitid parasitoid sister groups, suggesting that they may be evolutionary innovations associated with cynipid gall induction.