The aryl hydrocarbon receptor (AHR) is a member of the basic helix-loop-helix/Per-ARNT-Sim (bHLH-PAS) family of transcription factors and has diverse roles in development, physiology, and environmental sensing in bilaterian animals. Studying the expression of conserved genes and function of proteins in outgroups to protostomes and deuterostomes assists in understanding the antiquity of gene function and deciphering lineage-specific differences in these bilaterian clades. We describe the developmental expression of AHR from the sea anemone Nematostella vectensis and compare its expression with three other members of the bHLH-PAS family (AHR nuclear translocator (ARNT), Cycle, and a proto-Single-Minded/Trachealess). NvAHR expression was highest early in the larval stage with spatial expression in the basal portion of the ectoderm that became increasingly restricted to the oral pole with concentrated expression in tentacles of the juvenile polyp. The other bHLH-PAS genes showed a divergent expression pattern in later larval stages and polyps, in which gene expression was concentrated in the aboral end, with broader expression in the endoderm later in development. In co-immunoprecipitation assays, we found no evidence for heterodimerization of AHR with ARNT, contrary to the conservation of this specific interaction in all bilaterians studied to date. Similar to results with other invertebrate AHRs but in contrast to vertebrate AHRs, NvAHR failed to bind two prototypical xenobiotic AHR ligands (2,3,7,8-tetrachlorodibenzo-p-dioxin, β-naphthoflavone). Together, our data suggest that AHR’s original function in Eumetazoa likely involved developmental patterning, potentially of neural tissue. The role of heterodimerization in the function of AHR may have arisen after the cnidarian–bilaterian ancestor. The absence of xenobiotic binding to NvAHR further supports a hypothesis for a derived role of this protein in chemical sensing within the chordates.