<p>Colonial ascidians are the only chordates to undergo whole body regeneration (WBR), the ability to form an entirely new individual from the peripheral vasculature. Here we describe WBR in Botrylloides violaceus, a colonial ascidian that reliably regenerates after ablation of all zooids and buds of young colonies. During early regeneration several buds develop within the tunic vasculature, but only one continues development into a complete zooid. We describe some of the first events of vascular budding leading to the vesicle stage with phase contrast microscopy, time-lapse video recording and detailed histological studies of regenerating colonies. The first conspicuous stage of vascular budding is when a single-layered sphere of cells becomes enclosed by vascular epithelium. We report the appearance of Piwi-positive cells in hemocytes surrounding the regenerates. We observed an increase of proliferating cell nuclear antigen (PCNA)-positive cells in circulatory hemocytes in late regenerates, and found double-labeled nuclear expression with Piwi in a subset of large circulatory cells. We rarely found Piwi or PCNA in differentiating tissues during vascular budding, suggesting that cells that form the epithelial tissues during budding and WBR originate mostly from circulatory hemocyte precursors. We propose that multiple stem cell types are circulating within B. violaceus and that they undergo proliferation in the peripheral vasculature before differentiating into epithelial tissues for all three germ layers during WBR.</p>