Hydra vulgaris exhibits a remarkable capacity to reassemble its body plan from a disordered aggregate of cells. Reassembly begins by sorting two epithelial cell types, endoderm and ectoderm, into inner and outer layers, respectively. The cellular features and behaviors that distinguish ectodermal and endodermal lineages to drive sorting have not been fully elucidated. To dissect this process, we use micromanipulation to position single cells of diverse lineages on the surface of defined multicellular aggregates and monitor sorting outcomes by live imaging. Although sorting has previously been attributed to intrinsic differences between the epithelial lineages, we find that single cells of all lineages sort to the interior of ectodermal aggregates, including single ectodermal cells. This reveals that cells of the same lineage can adopt opposing positions when sorting as individuals or a collective. Ectodermal cell collectives adopt their position at the aggregate exterior by rapidly reforming an epithelium that engulfs cells adhered to its surface through a collective spreading behavior. In contrast, aggregated endodermal cells persistently lose epithelial features. These non-epithelialized aggregates, like isolated cells of all lineages, are adherent passengers for engulfment by the ectodermal epithelium. We find that collective spreading of the ectoderm and persistent de-epithelialization in the endoderm also arise during local wounding in Hydra, suggesting that Hydra's wound-healing and self-organization capabilities may employ similar mechanisms. Together, our data suggest that differing propensities for epithelialization can sort cell types into distinct compartments to build and restore complex tissue architecture. Copyright © 2020 Elsevier Inc. All rights reserved.