Understanding the evolutionary transition to multicellularity is a key problem in evolutionary biology (1,2). While around 25 independent instances of the evolution of multicellular existence are known across the tree of life (3), the ecological conditions that drive such transformations are not well understood. The first known transition to multicellularity occurred approximately 2.5 billion years ago in cyanobacteria (4,5,6), and today's cyanobacteria are characterized by an enormous morphological diversity, ranging from single-celled species over simple filamentous to highly differentiated filamentous ones (7,8). While the cyanobacterium Cyanothece sp. ATCC 51142 was isolated from the intertidal zone of the U.S. Gulf Coast as a unicellular species (9), we are first to additionally report a phenotypically mixed strategy where multicellular filaments and unicellular stages alternate. We experimentally demonstrate that the facultative multicellular life cycle depends on environmental conditions, such as salinity and population density, and use a theoretical model to explore the process of filament dissolution. While results predict that the observed response can be caused by an excreted compound in the medium, we cannot fully exclude changes in nutrient availability (as in (10,11)). The best fit modeling results demonstrate a nonlinear effect of the compound, which is characteristic for density-dependent sensing systems (12,13). Further, filament fragmentation is predicted to occur by means of connection cleavage rather than by cell death of every alternate cell. The phenotypic switch between the single-celled and multicellular morphology constitutes an environmentally dependent life cycle, which likely represents an important step en route to permanent multicellularity.