SUMMARY: The biology of Echinococcus granulosus is reviewed and attention given to recent advances in our understanding of this parasite. In particular, studies on the parasite within the definitive host, an area which has been neglected in the past, have demonstrated our lack of knowledge concerning the cytodifferentiation of the adult cestode during its development, and events which take place at the host‐parasite interface. An important aspect of the biology of the parasite is the nature of its reproductive mechanism which involves both sexual and asexual multiplication. Such a reproductive pattern is considered to be the major factor responsible for the appearance of subspecific variants of E. granulosus adapted both to domestic and wild animal life cycles.The speciation pattern that exists within the species E. granulosus is extremely complex. Numerous subspecific variants have been described and attempts to unravel the situation taxonomically have resulted in controversy. Criteria used in the recognition of specific and subspecific varieties have all too often over emphasised morphological details, while the presence of biological differences between varieties or strains has been neglected. Recently, however, comparative studies on various strains have demonstrated the value of considering epidemiological, developmental and biochemical criteria. The significance of these criteria beyond pure taxonomic considerations is becoming increasingly evident, and future studies may help to explain differences in reproductive potential and host specificity.In Australia, hydatid disease is of considerable economic and public health significance, yet there has been little work undertaken on the speciation of the parasite. The potential for the existence of speciation differences within Australia is greater than in some other countries, since geographical separation may act as a factor in the selection of subspecific strains. Of particular importance is whether the existence of wild‐animal cycles is dependent upon the maintenance of domestic life cycles in Australia.