It has been convincingly shown that peptides play important roles in the regulation and maintenance of a variety of tissues and organs in living animals. However, little is known concerning the potential role of peptides as signaling molecules in developmental processes. In Hydra, there is circumstantial evidence that small diffusible molecules act as morphogens in the regulation of patterning processes. In order to view the entire spectrum of peptide signaling molecules, we initiated a project aiming at the systematic identification of peptide signaling molecules in Hydra. In this review, we describe three peptide signaling molecules and one family of peptides that function as signaling molecules in the processes of axial pattern formation and neuron differentiation in Hydra. These peptides are produced by epithelial cells and are therefore termed “epitheliopeptides”. We discuss the importance of epitheliopeptides in developmental processes within a subset of hydrozoans.