Sexually mature adults and embryos and larvae of Cephalodiscus nigrescens and C. gracilis were studied by light and electron microscopy. Contrary to claims in the literature, individual coenecial cavities are inhabited by colonies of up to 15 joined zooids and not by single individuals, which is important for the interpretation of the mode of life of the related fossil group the graptolites. Some aspects of the reproductive apparatus and reproduction in Cephalodiscus are reported. The ultrastructure of the spermatozoon is described for the first time. Coelom formation is by schizocoely. The structure of the larva at several developmental stages is illustrated. Not all fertilised eggs are destined to become motile larvae and some develop into zooids omitting the motile stage. The lumen of the oviduct is much larger than previously supposed. Spermatozoa are shed into the cavity of the coenecium. It is proposed that fertilisation takes place within the coenecium. The ultrastructure of the enigmatic black ‘Comma Body’ is described and a reproductive function is proposed. Budding takes place from a base common to several zooids. This base probably also serves as an attachment foot. Large masses of yolk have been discovered within the coelom of some zooids and muscle stalks. It is inconceivable that a colony of Cephalodiscus nigrescens could survive unless it spent most of its life outside the coenecium.