The molecular nature of tumours is well studied in vertebrates, although their evolutionary origin remains unknown. In particular, there is no evidence for naturally occurring tumours in pre-bilaterian animals, such as sponges and cnidarians. This is somewhat surprising given that recent computational studies have predicted that most metazoans might be prone to develop tumours. Here we provide first evidence for naturally occurring tumours in two species of Hydra. Histological, cellular and molecular data reveal that these tumours are transplantable and might originate by differentiation arrest of female gametes. Growth of tumour cells is independent from the cellular environment. Tumour-bearing polyps have significantly reduced fitness. In addition, Hydra tumours show a greatly altered transcriptome that mimics expression shifts in vertebrate cancers. Therefore, this study shows that spontaneous tumours have deep evolutionary roots and that early branching animals may be informative in revealing the fundamental mechanisms of tumorigenesis.