The extant Onychophora are basal representatives of the Arthropoda, resembling Cambrian arthropod stem-group fossils such as Aysheaia and other so-called lobopodians. They thus provide an important model system for early stages in arthropod evolution, especially those of the head. However, homologies between onychophoran and euarthropod head structures have remained uncertain, and previous descriptions of the onychophoran head are contradictory. Our investigation examines the cephalic nerves of two species of onychophoran using immunohistochemical and confocal laser scanning microscopical techniques. Our new reconstruction for the distribution of onychophoran cephalic nerves differs significantly from previous accounts. The so-called "labrum" of the Onychophora appears to be part of the pharynx, and any affinities to the various pre-oral outgrowths of crown-group arthropods referred to as hypostomata and/or labra can be ruled out. The innervation of the mouth is particularly noteworthy, as its nerves originate from three different regions of the brain, including the dorsum. This suggests that the mouth was primitively terminal/frontal, although subsequent ventral rotation of the mouth may have been parallelly achieved in Onychophora and in Euarthropoda. Our model allows the onychophoran cephalic nervous system to be interpreted as a modified circumoral nerve ring, similar to that seen in the nematodes and other cycloneuralians. We regard this as supporting the Ecdysozoa model of arthropod relationships.