Globular fossils showing palintomic cell cleavage in the Ediacaran Doushantuo Formation, China, are widely regarded as embryos of early metazoans, although metazoan synapomorphies, tissue differentiation, and associated juveniles or adults are lacking. We demonstrate using synchrotron-based x-ray tomographic microscopy that the fossils have features incompatible with multicellular metazoan embryos. The developmental pattern is comparable with nonmetazoan holozoans, including germination stages that preclude postcleavage embryology characteristic of metazoans. We conclude that these fossils are neither animals nor embryos. They belong outside crown-group Metazoa, within total-group Holozoa (the sister clade to Fungi that includes Metazoa, Choanoflagellata, and Mesomycetozoea) or perhaps on even more distant branches in the eukaryote tree. They represent an evolutionary grade in which palintomic cleavage served the function of producing propagules for dispersion.