Phase I cells of Photorhabdus luminescens produce two types of intracellular crystalline inclusion proteins designated CipA and CipB. The genes encoding CipA and CipB proteins from P. luminescens H06 were expressed respectively in Escherichia coli and these cells were used to feed the axenic first juveniles (J1) of three Steinernema nematode isolates in liquid cultures and on agar plates. In liquid cultures, the axenic J1 juveniles of all three test Steinernema nematode isolates were able to produce next dauer juveniles (DJs) in the E. coli cultures with at least one of the expressed Cip proteins, but unable to develop beyond the next J1 stage without expressed Cip proteins. For each target nematode isolate, addition of the supernatant of the bacterial culture of its Xenorhabdus symbiont to the tested liquid cultures did not induce the formation of DJs. However, on LB agar plates with different test E. coli cultures, all J1 juveniles of the three Steinernema strains finally developed into next DJs. It seemed that the metabolite pathway of the test bacteria in both culture systems was different. The presence of the Cip proteins has a significant influence on the DJ formation of the Steinernema nematodes in liquid culture system.