Body muscle-cell differentiation was ultrastructurally examined in palleal buds of the colonial tunicate Symplegma reptans. Undifferentiated coelomic cells accumulate near the primordial oral siphon and associate with the basal lamina beneath the epidermis. They initially display the characteristics of hemoblast cells that have a large nucleus with a prominent nucleolus and narrow cytoplasm filled with polysomes. However, they soon become unique due to the development of an indented contour of the nucleus. When the basal lamina of the epidermis develops into the fibrous extracellular matrix (ECM), the muscle precursor cell has the deeply-notched nucleus, and thick and thin filaments in the cytoplasm facing the ECM. Collagen fibril-like structures appear in the ECM. Myofilaments are arranged with the ratio of thick to thin filaments being 1:2.5. Dense bodies and plaques become evident before the oral siphon is perforated. These results show that in S. reptans, the sphincter muscle cells arise from undifferentiated hemoblasts, and that their differentiation begins with a morphological change in their nuclei. Epidermal cells and/or the ECM may have an inductive effect on muscle cell differentiation.