Diplosoma listerianum differs from most ascidians in that, at ovulation, eggs are emitted at the bottom of the ovary and segregated into the tunic, so that fertilization occurs far from seawater. A fertilization canal, a hollow extension of the ovary, conducts sperm towards the egg. In the present paper, ultrastructural evidence is reported on the morphological relationship between the ovary, egg envelopes and oocyte and on the mechanism by which sperm-egg interaction is established. In the ovary, the very complex sperm, equipped with a spiral “dense groove”, undergo metamorphosis as the first step in a sperm reaction and then pass through the ovary epithelium insinuating themselves between the intercellular junctions which appear to be mouldable, although able to maintain the egg-ovary barrier. Sperm then reach the vitelline coat, where a further step in the sperm reaction occurs. Before the egg abandons the ovary, the sperm head is incorporated into the oocyte by a process recalling phagocytosis, with the formation of an engulfing pocket. Sperm-egg contact and incorporation in D. listerianum occur in a way, never previously reported for other ascidians, in which fusion of plasma membranes takes place immediately after sperm-egg contact. Unlike other cytoplasmic components, the dense groove persists until the sperm enters the egg. It gives a corkscrew-like configuration to the sperm head and allows close adhesion to cell membranes, facilitating sperm movement. Expulsion of numerous cortical granules and features of a cortical reaction were observed in the egg penetrated by the sperm. The mode of internal fertilization of this species in comparison with that of other tunicates and phylogenetic aspects are discussed. Ripe colonies of D. listerianum collected in the Lagoon of Venice, Italy in 1986 and 1991 and colonies reared on glass in aquaria were used for our investigations.