The homeostatic mechanisms that maintain constant cellular ratios in hydra tissue were studied using mutant and chimeric hydra strains. Mutants having abnormal cellular compositions are isolated through sexual inbreeding of wild hydra, as described in previous papers of this series. Chimeric hydra are produced by making use of a strain (nf-I) which lacks interstitial cells, nerve cells and nematocytes in its tissue. Reintroduction of interstitial cells from other strains (both normal and mutant) into nf-I leads to creation of chimeric strains having epithelial cell lineages from one strain (nf-I) and interstitial cell lineages from others. Analyses and comparisons of the cellular compositions of all these strains revealed that the numbers of nerve or interstitial cells in the chimeras were very similar to (statistically significantly correlated with) those in their interstitial cell donors. Since chimeras and their interstitial cell donors share the same interstitial cell lineages, this suggests that interstitial cells or their derivatives (nerves and nematocytes) play major roles in determining the nerve and interstitial cell levels in the hydra tissue. It is suggested that some form of homeostatic feedback mechanisms are probably involved in regulating the levels of these cell types.