Recent evidence suggests that ascidian pigment cells are related to neural crest-derived melanocytes of vertebrates. Using live-imaging, we determine a revised cell lineage of the pigment cells in Ciona intestinalis embryos. The neural precursors undergo successive rounds of anterior-posterior (A-P) oriented cell divisions, starting at the blastula 64-cell stage. A previously unrecognized fourth A-P oriented cell division in the pigment cell lineage leads to the generation of the post-mitotic pigment cell precursors. We provide evidence that MEK/ERK signals are required for pigment cell specification until approximately 30min after the final cell division has taken place. Following each of the four A-P oriented cell divisions, ERK1/2 is differentially activated in the posterior sister cells, into which the pigment cell lineage segregates. Eph/ephrin signals are critical during the third A-P oriented cell division to spatially restrict ERK1/2 activation to the posterior daughter cell. Targeted inhibition of Eph/ephrin signals results in, at neurula stages, anterior expansion of both ERK1/2 activation and a pigment cell lineage marker and subsequently, at larval stages, supernumerary pigment cells. We discuss the implications of these findings with respect to the evolution of the vertebrate neural crest.