The gemmule coat of Spongilla lacustris is histologically single-layered in the gemmules studied in this work. This single layer is comparable to the classically described internal “chitinous” membrane of Leveaux (1939). It has been found to contain collagen with an axial period in electron micrographs of about 120 A and is bounded internally by a thin dense layer which is separate from the internal gemmular cells, and which may be chitinous. Gemmules of this sponge studied during March to June of 1973 respond to 230 mOsmolar solutions of small molecules by: 1. undergoing no change, in which case the substances are freely permeable to the gemmule coat and cells; 2. displaying shrinkage of the cell mass, in which case the substances are permeable to the coat but relatively impermeable to the cells; 3. displaying folding of the coat and cell mass shrinkage because the substances are relatively impermeable to both the coat and the cells; and 4. displaying complete collapse of the gemmule due to impermeability to the coat. The lipid solubility of a substance is directly related to its ability to penetrate the coat. Further, molecular size and charge are also of apparent importance. Substances which penetrate the coat and remain osmotically active (are not metabolized) inhibit hatching. Low concentrations of sodium chloride (23 mOsmolar) have been demonstrated to reversibly inhibit hatching. Higher concentrations cause irreversible damage at 20° C but have little effect at 4° C, indicating that damage is related to the metabolic level of the cells. Once hatching is stimulated by increased temperature the cells become progressively less sensitive to an increase in osmotically active substances. Inhibition of gemmule hatching can theoretically occur by: 1. an addition of solutes to the gemmular fluid, or 2. through an increase in concentration of intragemmular solutes by water withdrawal. Our results raise the question of whether the inhibition of hatching by gemmulostasine, reported by Rasmont (1965) and Rozenfeld (1970, 1971), is due to an osmotic effect rather than to a specific physiological one. Based upon the results reported here and on the work of Zeuthen (1939) and Schmidt (1970) we propose a tight coupling between the intragemmular osmotic pressure and the triggering of hatching (cell division). Any substance which increases intragemmular osmotic pressure to a large enough extent will inhibit hatching. Furthermore, it can be hypothesized that hatching is normally triggered by a decrease in osmotic pressure due to water movement into the gemmule, the movement of solutes out of the gemmule, or to a combination of these.