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Background Developmental physiology is very sensitive to nutrient availability. For instance, in the nematode Caenorhabditis elegans, newly hatched L1-stage larvae require food to initiate postembryonic development. In addition, larvae arrested in the dauer diapause, a non-feeding state of developmental arrest that occurs during the L3 stage, initiate recovery when exposed to food. Despite the essential role of food in C. elegans development, the contribution of food perception versus ingestion on physiology has not been delineated. Results We used a pharmacological approach to uncouple the effects of food (bacteria) perception and ingestion in C. elegans. Perception was not sufficient to promote postembryonic development in L1-stage larvae. However, L1 larvae exposed to food without ingestion failed to develop upon return to normal culture conditions, instead displaying an irreversible arrest phenotype. Inhibition of gene expression during perception rescued subsequent development, demonstrating that the response to perception without feeding is deleterious. Perception altered DAF-16/FOXO subcellular localization, reflecting activation of insulin/IGF signaling (IIS). The insulin-like peptide daf-28 was specifically required, suggesting perception in chemosensory neurons, where it is expressed, regulates peptide synthesis and possibly secretion. However, genetic manipulation of IIS did not modify the irreversible arrest phenotype caused by food perception, revealing that wild-type function of the IIS pathway is not required to produce this phenotype and that other pathways affected by perception of food in the absence of its ingestion are likely to be involved. Gene expression and Nile red staining showed that food perception could alter lipid metabolism and storage. We found that starved larvae sense environmental polypeptides, with similar molecular and developmental effects as perception of bacteria. Environmental polypeptides also promoted recovery from dauer diapause, suggesting that perception of polypeptides plays an important role in the life history of free-living nematodes. Conclusions We conclude that actual ingestion of food is required to initiate postembryonic development in C. elegans. We also conclude that polypeptides are perceived as a food-associated cue in this and likely other animals, initiating a signaling and gene regulatory cascade that alters metabolism in anticipation of feeding and development, but that this response is detrimental if feeding does not occur. Electronic supplementary material The online version of this article (10.1186/s12915-018-0579-3) contains supplementary material, which is available to authorized users.