Self-fertile hermaphrodites have evolved from male/female ancestors in many nematode species, and this transition occurred on three independent occasions in the genus Caenorhabditis. Genetic analyses in Caenorhabditis show that the origin of hermaphrodites required two types of changes: alterations to the sex-determination pathway that allowed otherwise female animals to make sperm during larval development, and the production of signals from the gonad that caused these sperm to activate and fertilize oocytes. Comparisons of C. elegans and C. briggsae hermaphrodites show that the ancestral sex-determination pathway has been altered in multiple unique ways. Some of these changes must have precipitated the production of sperm in XX animals, and others were modifying mutations that increased the efficiency of hermaphroditic reproduction. Reverse genetic experiments show that XX animals acquired the ability to activate sperm by co-opting one of the two redundant pathways that normally work in males. Finally, the adoption of a hermaphroditic lifestyle had profound effects on ecological and sexual interactions and genomic organization. Thus, nematode mating systems are ideal for elucidating the origin of novel traits, and studying the influence of developmental processes on evolutionary change.