Comparative studies of nematode embryogenesis among different clades revealed considerable variations. However, to what extent developmental differences exist between closely related species has mostly remained nebulous. Here, we explore the correlation between phylogenetic neighborhood and developmental variation in a restricted and morphologically particularly uniform taxonomic group (Panagrolaimidae) to determine to what extent (1) morphological and developmental characters go along with molecular data and thus can serve as diagnostic tools for the definition of kinship and (2) developmental system drift (DSD; modifications of developmental patterns without corresponding morphological changes) can be found within a small taxonomic unit. Our molecular approaches firmly support subdivision of Panagrolaimid nematodes into two monophyletic groups. These can be discriminated by distinct peculiarities in early embryonic cell lineages and a mirror-image expression pattern of the gene skn-1. This suggests major changes in the logic of cell specification and the action of DSD in the studied representatives of the two neighboring nematode taxa.