While most cancers are not transmissible, there are rare cases where cancer cells have acquired the ability to spread vertically or horizontally to other individuals, and sometimes species, causing epidemics in their hosts. However, as these transmissible cancers are usually detected once they are relatively well disseminated in host populations, the conditions associated with their origin remain poorly understood. Using the freshwater cnidarian Hydra oligactis, which exhibits spontaneous tumor development that in some strains became vertically transmitted, this study presents the first experimental observation of the evolution of a transmissible tumor. Specifically, we assessed the initial vertical transmission rate of spontaneous tumors and explored the potential for optimizing this rate through artificial selection. One of the hydra strains, which evolved transmissible tumors over five generations, was characterized by analysis of cell type and microbiome, as well as assessment of life-history traits. Our findings indicate that tumor transmission can be immediate for some strains and can be enhanced by selection. The resulting tumors are characterized by overproliferation of large interstitial stem cells and, in contrast with other transmissible tumors on Hydra, are not associated with a specific microbiome. Furthermore, although tumor transmission has only been established over 5 generations, it was sufficient to alter life-history traits in the host, suggesting a compensatory response. This work, therefore, makes the first contribution to understanding the conditions of transmissible cancer emergence and their short-term consequences for the host.