Nanos is a pan-metazoan germline marker, important for germ cell development and maintenance. In flies, Nanos also acts in posterior and neural development, but these functions have not been demonstrated experimentally in other animals. Using the cnidarian Hydractinia we have uncovered novel roles for Nanos in neural cell fate determination. Ectopic expression of Nanos2 increased the numbers of embryonic stinging cell progenitors, but decreased the numbers of neurons. Downregulation of Nanos2 had the opposite effect. Furthermore, Nanos2 blocked maturation of committed, post-mitotic nematoblasts. Hence, Nanos2 acts as a switch between two differentiation pathways, increasing the numbers of nematoblasts at the expense of neuroblasts, but preventing nematocyte maturation. Nanos2 ectopic expression also caused patterning defects, but these were not associated with deregulation of Wnt signaling, showing that the basic anterior-posterior polarity remained intact, and suggesting that numerical imbalance between nematocytes and neurons might have caused these defects, affecting axial patterning only indirectly. We propose that the functions of Nanos in germ cells and in neural development are evolutionarily conserved, but its role in posterior patterning is an insect or arthropod innovation.