Ascidian development is reviewed and a model is presented for specification of the larval body plan and cell fate during embryogenesis. The model involves the combined activity of determinants inherited from the egg and inductive cell interactions in the embryo. It is suggested that there are four determinant systems in the egg which are segregated to different blastomeres during cleavage. The ectodermal, endodermal, and muscle determinants specify cell fate autonomously, while the axial determinants initiate cell-shape changes at gastrulation and generate a cascade of inductive activities establishing the larval body plan. In the proposed signalling cascade, the endoderm induces notochord by generating a planar inductive signal late during the cleavage phase, and the notochord cells in turn induce the nervous system by generating a vertical inductive signal in the overlying ectoderm during gastrulation. Ultraviolet (UV) irradiation experiments are described which suggest that axial and muscle determinants exhibit UV-sensitive components resembling nucleic acids and proteins, respectively. The model is evaluated in terms of developmental changes during the evolutionary transition from indirect to direct development. This transition can be explained according to the model by loss or inactivation of the muscle determinants and modification of the inductive activities generated by the axial determinants. These changes are supported by recent studies of embryogenesis in direct-developing ascidians.