Small-molecule signaling in nematode dauer formation has emerged as a major model to study chemical communication in development and evolution. Developmental arrest as nonfeeding and stress-resistant dauer larvae represents the major survival and dispersal strategy. Detailed studies in Caenorhabditis elegans and Pristionchus pacificus revealed that small-molecule communication changes rapidly in evolution resulting in extreme structural diversity of small-molecule compounds. In C. elegans, a blend of ascarosides constitutes the dauer pheromone, whereas the P. pacificus dauer pheromone includes additional paratosides and integrates building blocks from diverse primary metabolic pathways. Despite this complexity of small-molecule structures and functions, little is known about the biosynthesis of small molecules in nematodes outside C. elegans. Here, we show that the genes encoding enzymes of the peroxisomal boxidation pathway involved in small-molecule biosynthesis evolve rapidly, including gene duplications and domain switching. The thiolase daf-22, the most downstream factor in C. elegans peroxisomal b-oxidation, has duplicated in P. pacificus, resulting in Ppa-daf-22.1, which still contains the sterol-carrier-protein (SCP) domain that was lost in C. elegans daf-22, and Ppa-daf-22.2. Using the CRISPR/Cas9 system, we induced mutations in both P. pacificus daf-22 genes and identified an unexpected complexity of functional conservation and divergence. Under well-fed conditions, ascaroside biosynthesis proceeds exclusively via Ppa-daf-22.1. In contrast, starvation conditions induce Ppa-daf-22.2 activity, resulting in the production of a specific subset of ascarosides. Gene expression studies indicate a reciprocal up-regulation of both Ppa-daf-22 genes, which is, however, independent of starvation. Thus, our study reveals an unexpected functional complexity of dauer development and evolution.