We review the application of Caenorhabditis elegans as a model system to understand key aspects of stem cell biology. The only bona fide stem cells in C. elegans are those of the germline, which serves as a valuable paradigm for understanding how stem-cell niches influence maintenance and differentiation of stem cells and how somatic differentiation is repressed during germline development. Somatic cells that share stem cell-like characteristics also provide insights into principles in stem-cell biology. The epidermal seam cell lineages lend clues to conserved mechanisms of self-renewal and expansion divisions. Principles of developmental plasticity and reprogramming relevant to stem-cell biology arise from studies of natural transdifferentiation and from analysis of early embryonic progenitors, which undergo a dramatic transition from a pluripotent, reprogrammable condition to a state of committed differentiation. The relevance of these developmental processes to our understanding of stem-cell biology in other organisms is discussed.