Here, we discovered an endogenous dafachronic acid (DA) in the socioeconomically important parasitic nematode Haemonchus contortus. We demonstrate that DA promotes larval exsheathment and development in this nematode via a relatively conserved nuclear hormone receptor (DAF-12). This stimulatory effect is dose- and time-dependent, and relates to a modulation of dauer-like signalling, and glycerolipid and glycerophospholipid metabolism, likely via a negative feedback loop. Specific chemical inhibition of DAF-9 (cytochrome P450) was shown to significantly reduce the amount of endogenous DA in H. contortus; compromise both larval exsheathment and development in vitro; and modulate lipid metabolism. Taken together, this evidence shows that DA plays a key functional role in the developmental transition from the free-living to the parasitic stage of H. contortus by modulating the dauer-like signalling pathway and lipid metabolism. Understanding the intricacies of the DA-DAF-12 system and associated networks in H. contortus and related parasitic nematodes could pave the way to new, nematode-specific treatments.