We report identification of a beta-type pigment-dispersing hormone (PDH) identical in two water flea species, Daphnia magna and Daphnia pulex. It has been identified by cloning of precursors, chromatographic isolation from tissue extracts followed by immunoassays and de novo-mass spectrometric sequencing. The peptide is restricted to a complex system of distinct interneurons in the brain and visual ganglia, but does not occur in neurosecretory cells projecting to neurohemal organs as in decapod crustaceans. Thirteen neuron types individually identified and reconstructed by immunohistochemistry were almost identical in terms of positions and projection patterns in both species. Several neurons invade and form plexuses in visual ganglia and major brain neuropils including the central body. Five neuron types show contralateral pathways and form plexuses in the lateral, dorsal, or postlateral brain neuropils. Others are local interneurons, and a tritocerebral neuron connects the protocerebrum with the neuropil of the locomotory second antenna. Two visual ganglia neuron types lateral to the medulla closely resemble insect medulla lateral circadian clock neurons containing pigment-dispersing factor based upon positional and projectional criteria. Experiments under 12:12h light/dark cycles and constant light or darkness conditions showed significant circadian changes in numbers and activities of one type of medulla lateral PDH neuron with an acrophase in the evening. This simple PDH system shows striking homologies to PDH systems in decapod crustaceans and well-known clock neurons in several insects, which suggests evolutionary conservation of an ancient peptidergic interneuronal system that is part of biological clocks.