Among the many hypotheses proposed to account for the unparalleled diversification of the Insecta, attributes of the egg stage have been largerly overlooked. Comparison with the Parainsecta (Collembola, Protura) suggests that the ovipositor, amnion and complex chorion are novel features acquired early in the evolution of the insects. We propose that insect diversity is at least partially a consequence of this suite of egg-stage characters which reduced constraints on suitable sites for egg deposition, and enabled insect lineages to diversify into previously inaccessible niches. In addition, the self-sufficient insect, egg, resistant to osmotic rupture, desiccation, and drowning, may explain the low incidence of postzygotic parental investment among insects relative to other terrestrial arthropods. In this paper, we review the unique structural and functional properties of insect eggs, and argue that ovoviviparity, viviparity and parental egg care may be have inhibited the evolution of such eggs in other terrestrial arthropod taxa. A preliminary evaluation of the hypothesis is presented, using the cladistic method of sister-group comparison. Sister taxa share a common history prior to divergence and thus provide some control for factors other than those under investigation. Contrasts within the insects suggest a historical association between diversification and expansion in type or range of habitats utilized for oviposition and larval development. An analogous relationship between diversification and methods of embryo protecion seems evident in the Arachnida. Although these general patterns are consistent with our hypothesis, far more information on terrestrial arthropod phylogenetic relationships and oviposition-related characters is required before a rigorous test of the theory is possible. Finally, we consider the relationship between egg-stage characters and other attributes implicated in terrestrial anthropod diversification. We suggest that insects would been unable to exploit the potential of holometaboly and flight without the capacity to ensure egg survival in the wide range of oviposition substrates provided by terrestrial environments.