Comparative embryology is integral to uncovering the pattern and process of metazoan phylogeny, but it relies on the assumption that life histories of living taxa are representative of their antecedents. Fossil embryos provide a crucial test of this assumption and, potentially, insight into the evolution of development, but because discoveries so far lack phylogenetic constraint, their significance is moot. Here we describe a collection of embryos from the Middle and Late Cambrian period (500 million years ago) of Hunan, south China, that preserves stages of development from cleavage to the pre-hatching embryo of a direct-developing animal comparable to living Scalidophora (phyla Priapulida, Kinorhyncha, Loricifera). The latest-stage embryos show affinity to the Lower Cambrian embryo Markuelia, whose life-history strategy contrasts both with the primitive condition inferred for metazoan phyla and with many proposed hypotheses of affinity, all of which prescribe indirect development. Phylogenetic tests based on these embryological data suggest a stem Scalidophora affinity. These discoveries corroborate, rather than contradict, the predictions of comparative embryology, providing direct historical support for the view that the life-history strategies of living taxa are representative of their stem lineages.