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Modularity is a salient feature of development and crucial to its evolution. This paper extends modularity to include the concept of gene expression territory, as established for sea urchin embryos. Territories provide a mechanism for partitioning of the cells of a rapidly developing embryo into functional units of a feeding larva. Territories exhibit the characteristics of modules. The paper asks if the embryo and the nonfeeding larva of the direct-developing sea urchin Heliocidaris erythrogramma are organized into gene expression territories, and if its territories correspond to the canonical territories of the pluteus. An analysis of cell lineage and gene expression data for H. erythrogramma shows that skeletogenic cell, coelomic, and vegetal plate gene expression territories are conserved, although they arise from cell lineages distinct from those of the pluteus, and the overall morphology of the larva differs from that of a pluteus. The ectoderm, as in indirect developers, is divided into territories. However, the oral ectodermal territory characteristic of the pluteus is absent in H. erythrogramma. Oral ectoderm is restored in hybrids of H. erythrogramma eggs fertilized by Heliocidaris tuberculata sperm. This indicates that embryonic modules evolve by changes in expression of dominant regulatory genes within territories and that entire modules can be eliminated in evolution of embryos.