Chordates consist of cephalochordates, urochordates, and vertebrates. They originated from a common ancestor(s) by evolving a novel type of tadpole-like larva characterized by a notochord and dorsal neural tube. Urochordata or Tunicata comprises three classes, Ascidiacea (ascidians), Thaliacea (salps), and Appendicularia (larvaceans); are extremely diverse in morphology, life history, and mode of reproduction; and may include either free-swimming or sessile adults. Recent molecular phylogenies support the notion that cephalochordates are basal among chordates, with urochordates the sister group to vertebrates. This revitalized evolutionary scenario compels us to explain how the huge variety of lifestyles of extant urochordates evolved from a cephalochordate-like ancestor. Here, an advanced filter-feeder hypothesis is presented, in which, although the taxonomic position of larvaceans is enigmatic, it is argued that among urochordates, free-living larvaceans are basal, while sessile ascidians are derived. Urochordates might have evolved their traits in response to strong evolutionary advantages as specialists of suspension filter feeding. Nevertheless, the molecular mechanisms involved in the formation of the notochord and several other organs in ascidian embryos are more comparable to those of vertebrates than cephalochordates. Thus, urochordates are close relatives to vertebrates.