Features of embryonic development in birds traditionally have been assumed to be shared by sauropsids in general. Herein, we document a pattern of yolk processing and cellularization in the Eastern fence lizard (Sceloporus undulatus) that is fundamentally different from that of birds. In the avian pattern, cells of the yolk sac lining phagocytose, and digest yolk material. These cells release products of digestion into underlying blood vessels for transport back to the embryo. In contrast, microscopic examination of the developing eggs of S. undulatus reveals that the yolk mass is converted into vascularized, “spaghetti‐like” strands that fill the yolk sac cavity. Three successive developmental stages are involved. First, the liquid yolk is invaded by proliferating endodermal cells, which phagocytose and digest the yolk material. These cells form clumps that progressively fill the yolk sac cavity. Second, small blood vessels derived from the yolk sac vasculature invade the yolk sac cavity. Third, the endodermal cells become organized in monolayers around these vessels. This arrangement provides a means by which large numbers of endodermal cells can digest yolk, with each cell being positioned to release products of digestion into an adjacent blood vessel for transport to the embryo. The mechanism of yolk processing in this lizard species is similar to that of recently studied snakes. From its phylogenetic distribution, we infer that this pattern probably is ancestral for squamate sauropsids.