Most hydrozoan cnidarians form complex colonies that vary in size, shape, and branching patterns. However, little is known about the molecular genetic mechanisms responsible for the diversity of the hydrozoan body plans. The Nodal signaling pathway has previously been shown to be essential for setting up a new body axis in a budding Hydra. This budding process is often compared to the branching of colonial hydrozoans, suggesting that the signaling mechanisms underlying branching and budding are evolutionarily conserved. Using the colonial hydrozoan Dynamena pumila, we demonstrated that colony architecture depends on the activity level of SMAD2/3-mediated signaling. Pharmacological inhibition of the SMAD2/3-mediated Nodal signaling pathway resulted in an altered architecture of D. pumila primary colony, resembling naturally occurring malformation. Additionally, we identified a Nodal-related gene in D. pumila and observed its expression at the earliest stage of new colony module formation. Taken together, our results suggest that TGF-β signaling pathway plays an important role in shaping the morphology of hydrozoan colony.