In bilaterians, COUP-TF nuclear receptors participate in neurogenesis and/or CNS patterning. In hydra, the nervous system is formed of sensory mechanoreceptor cells (nematocytes) and neuronal cells, both lineages deriving from a common stem cell. The hydra COUP-TF gene, hyCOUP-TF, which encodes highly conserved DNA-binding and ligand-binding domains, belongs to the monophyletic COUP-TFs orphan receptor family (NR2F). In adult polyps, hyCOUP-TF is expressed in nematoblasts and a subset of neuronal cells. Comparative BrDU labeling analyses performed on cells expressing either hyCOUP-TF or the paired-like gene prdl-b showed that prdl-b expression corresponded to early stages of proliferation, while hyCOUP-TF was detected slightly later. HyCOUP-TF and prdl-b expressing cells disappeared in sf-1 mutants becoming "nerve-free". Moreover hyCOUP-TF and prdl-b expression was excluded from regions undergoing developmental processes. These data suggest that hyCOUP-TF and prdl-b belong to a genetic network that appeared together with neurogenesis during early metazoan evolution. The hyCOUP-TF protein specifically bound onto the evolutionarily conserved DR1 and DR5 response elements, and repressed transactivation induced by RAR:RXR nuclear receptors in a dose-dependent manner when expressed in mammalian cells. Hence, a cnidarian transcription factor can be active in vertebrate cells, implying that functional interactions between COUP-TF and other nuclear receptors were evolutionarily conserved.