Fertilized oocytes of the brine shrimpArtemia franciscanaundergo either ovoviviparous or oviparous development, yielding free-swimming larvae (nauplii) or encysted gastrulae (cysts), respectively. Encystment is followed by diapause, wherein metabolism is greatly reduced; the resulting cysts are very resistant to extreme stress, including desiccation and long-term anoxia. The synthesis of p26, a small heat shock/α-crystallin protein produced only in oviparously developingArtemia,is shown in this paper to be transcriptionally regulated. A p26 mRNA of about 0.7 kb was detected on Northern blots in the second day after oocyte fertilization. It peaked as embryos encysted and declined rapidly when activated cysts resumed development. The appearance of p26 protein, as indicated by immunoprobing of Western blots, followed mRNA by 1 day; it also increased as encystment occurred but remained constant during postgastrula development of cysts. However, p26 underwent a marked reduction during emergence of nauplii and could not be detected in cell-free extracts of second-instar larvae. p26 entered nuclei of encysting embryos soon after synthesis and was localized therein as late as instar II, when it was restricted to a small set of salt gland nuclei. First-instar larvae derived from cysts were more thermotolerant than larvae that had developed ovoviviparously, but synthesis of p26 was not induced by heat under the experimental conditions employed. Additionally, transformed bacteria synthesizing p26 were more thermotolerant than bacteria that lacked the protein. The results support the proposal that p26, a developmentally regulated protein synthesized during embryo encystment, has chaperone activityin vivoand protects the proteins of encystedArtemiafrom stress-induced denaturation.