Three aspects of early sea urchin development are reviewed, and conclusions derived that lead to a unified concept of how the initial specifications of differential gene activity may occur in this embryo. i. The embryo has an invariant cell lineage, and the lineage founder cells can be considered as regulatory spatial domains. That is, from each of these cells descend clones of progeny the members of which express the same set of lineage-specific genes. ii. From the extensive classical literature on blastomere plasticity, and some key modern experiments, are derived a system of inductive blastomere interactions, which accounts for the conditionality of lineage founder cell specification. That is, the fates of many of the lineage founder cells can apparently be altered if the normal spatial interrelationships within the embryo are perturbed. iii. Recent studies have been carried out by gene transfer, and are supported by in vitro analyses of DNA-protein interactions in the regulatory regions of two genes that are expressed in a lineage- specific manner. Expression of both of these markers of cell fate specification is controlled by diffusible DNA-binding factors (i.e. within each nucleus). A molecular mechanism is proposed, based on inductive effects on gene regulatory factors, which in principle provides a specific explanation of the regulative capacities for which this embryo is famous.