The evolutionary origin of stem cell pluripotency is an unresolved question. In mammals, pluripotency is limited to early embryos and is induced and maintained by a small number of key transcription factors, of which the POU domain protein Oct4 is considered central. Clonal invertebrates, by contrast, possess pluripotent stem cells throughout their life, but the molecular mechanisms that control their pluripotency are poorly defined. To address this problem, we analyzed the expression pattern and function of Polynem (Pln), a POU domain gene from the marine cnidarian Hydractinia echinata. We show that Pln is expressed in the embryo and adult stem cells of the animal and that ectopic expression in epithelial cells induces stem cell neoplasms and loss of epithelial tissue. Neoplasm cells downregulated the transgene but expressed the endogenous Pln gene and also Nanos, Vasa, Piwi and Myc, which are all known cnidarian stem cell markers. Retinoic acid treatment caused downregulation of Pln and the differentiation of neoplasm cells to neurosensory and epithelial cells. Pln downregulation by RNAi led to differentiation. Collectively, our results suggest an ancient role of POU proteins as key regulators of animal stem cells.