Deuterostomes include the group we belong to (vertebrates) as well as an array of disparate forms that include echinoderms, hemichordates and more problematic groups such as vetulicolians and vetulocystids. The Cambrian fossil record is well-populated with representative examples, but possible intermediates are controversial and the nature of the original deuterostome remains idealized. Here we report millimetric fossils, Saccorhytus coronarius nov. gen., nov. sp., from an Orsten-like Lagerstätte from the earliest Cambrian period of South China, which stratigraphically are amongst the earliest of deuterostomes. The bag-like body bears a prominent mouth and associated folds, and behind them up to four conical openings on either side of the body as well as possible sensory structures. An anus may have been absent, and correspondingly the lateral openings probably served to expel water and waste material. This new form has similarities to both the vetulicolians and vetulocystids and collectively these findings suggest that a key step in deuterostome evolution was the development of lateral openings that subsequently were co-opted as pharyngeal gills. Depending on its exact phylogenetic position, the meiofaunal habit of Saccorhytus may help to explain the major gap between divergence times seen in the fossil record and estimates based on molecular clocks.