We review the application of Caenorhabditis elegans as a model system to understand key aspects of stem cell biology. The only bona fide stem cells in C. elegans are those of the germline, which serves as a valuable paradigm for understanding how stem-cell niches influence maintenance and differentiation of stem cells and how somatic differentiation is repressed during germline development. Somatic cells that share stem cell–like characteristics also provide insights into principles in stem-cell biology. The epidermal seam cell lineages lend clues to conserved mechanisms of self-renewal and expansion divisions. Principles of developmental plasticity and reprogramming relevant to stem-cell biology arise from studies of natural transdifferentiation and from analysis of early embryonic progenitors, which undergo a dramatic transition from a pluripotent, reprogrammable condition to a state of committed differentiation. The relevance of these developmental processes to our understanding of stem-cell biology in other organisms is discussed. Developmental Dynamics 239:1539–1554, 2010. © 2010 Wiley-Liss, Inc.