Muscle-based movement is a hallmark of animal biology, but the evolutionary origins of myocytes - the cells that comprise muscle tissues - are unknown. Sponges (Porifera) provide an opportunity to reconstruct the earliest periods of myocyte evolution. Although sponges are believed to lack muscle, they are capable of coordinated whole-body contractions that purge debris from internal water canals. This behavior has been observed for decades, but their contractile tissues remain uncharacterized. It is an open question whether they share affinity to muscle or non-muscle contractile tissues in other animals. Here, we characterize the endothelial-like lining of water canals (the endopinacoderm) as a primary contractile tissue in the sponge Ephydatia muelleri. We find tissue-wide organization of contractile actin-bundles that contain striated-muscle myosin II and transgelin, and that contractions are regulated by the release of internal Ca2+ stores upstream of the myosin-light-chain-kinase (MLCK) pathway. Further, we show that the endopinacoderm is developmentally specified by myocardin-related transcription factor (MRTF) as part of an environmentally-inducible transcriptional complex that functions in muscle development, plasticity, and regeneration in other animals. We conclude that the contractile machinery shared between the endopinacoderm and myocytes likely evolved in the context of a multifunctional, muscle-related tissue in the animal stem-lineage. Furthermore, as an actin-regulated force-sensor, MRTF-activity offers a mechanism for how water canals dynamically remodel in response to flow and can re-form normally from stem-cells in the absence of the intrinsic positional cues characteristic of embryogenesis in other animals.