Taxonomically restricted genes or lineage-specific genes contribute to morphological diversification in metazoans and provide unique functions for particular taxa in adapting to specific environments. To understand how such genes arise and participate in morphological evolution, we have investigated a gene called nematogalectin in Hydra, which has a structural role in the formation of nematocysts, stinging organelles that are unique to the phylum Cnidaria. Nematogalectin is a 28-kDa protein with an N-terminal GlyXY domain (glycine followed by two hydrophobic amino acids), which can form a collagen triple helix, followed by a galactose-binding lectin domain. Alternative splicing of the nematogalectin transcript allows the gene to encode two proteins, nematogalectin A and nematogalectin B. We demonstrate that expression of nematogalectin A and B is mutually exclusive in different nematocyst types: Desmonemes express nematogalectin B, whereas stenoteles and isorhizas express nematogalectin B early in differentiation, followed by nematogalectin A. Like Hydra, the marine hydrozoan Clytia also has two nematogalectin transcripts, which are expressed in different nematocyte types. By comparison, anthozoans have only one nematogalectin gene. Gene phylogeny indicates that tandem duplication of nematogalectin B exons gave rise to nematogalectin A before the divergence of Anthozoa and Medusozoa and that nematogalectin A was subsequently lost in Anthozoa. The emergence of nematogalectin A may have played a role in the morphological diversification of nematocysts in the medusozoan lineage.