In most animal phyla from insects to mammals, there is a clear division of somatic and germ line cells. This is however not the case in plants and some animal phyla including tunicates, flatworms and the basal phylum Cnidaria, where germ stem cells arise de novo from somatic cells. Piwi-like genes represent essential stem cell genes in diverse multicellular organisms. The cnidarian Piwihomolog Cniwiwas cloned from Podocoryne carnea, a hydrozoan with a full life cycle. CniwiRNA is present in all developmental stages with highest levels in the egg and the medusa. In the adult medusa, Cniwi expression is prominent in the gonads where it likely functions as a germ stem cell gene. The gene is also expressed, albeit at low levels, in differentiated somatic cells like the striated muscle of the medusa. Isolated striated muscle cells can be induced to transdifferentiate into smooth muscle cells which proliferate and differentiate into nerve cells. Cniwi expression is upregulated transiently after induction of transdifferentiation and again when the emerging smooth muscle cells proliferate and differentiate. The continuous low-level expression of an inducible stem cell gene in differentiated somatic cells may underlie the ability to form medusa buds from polyp cells and explain the extraordinary transdifferentation and regeneration potential of Podocoryne carnea.