Sponges are hermaphroditic but usually cross-fertilize. Eggs and sperm form in the mesohyl from differentiated amoebocytes or choanocytes.
Eggs remain in the mesohyl.
Sperm are released into excurrent flow of the spongocoel and are then drawn in with incurrent flow of another sponge. Sperm penetrate into mesohyl and fertilize the eggs. The zygote develops into a flagellated larva which is released into the spongocoel and escapes with the excurrent water through the osculum. Surviving larvae settle on the substratum and develop. In most cases the larva turns inside-out during metamorphosis, moving the flagellated cells to the inside.