Lissoclinum punctatum is a colonial ascidian that harbors the symbiotic prokaryotic alga Prochloron in its tunic and in the peribranchial and common cloacal cavities. Most symbiotic cells in the tunic are intracellular (tunic phycocytes), while those in the cavities are extracellular. We found that neither gametes nor embryos brooded in the tunic were associated with photosymbionts. We determined that algal cells attach to posterior parts of the trunk of hatching larvae swimming in the common cloacal cavity. No symbiont cells were found intracellularly in larval tissues. Thus, extracellular Prochloron cells in the cloacal cavities were transferred to the larvae, but intracellular photosymbionts in the tunic were not. The intracellular symbiosis must be reestablished in each generation after larval settlement.