Entomologists have discovered 12 species of moths whose caterpillars can survive both in the water and on land. Most insects pick either one or the other, which makes these caterpillars truly unique. Daniel Rubinoff, an entomologist from University of Hawaii, Honolulu focuses his research on the moth genus Hyposmocoma, a genus he previously thought to have purely terrestrial larva. Needless to say, he was a bit surprised to find out they were more versatile than he expected. These species appear to breathe through their skin, rather than gills (as seen in other aquatic species), while anchored to submerged rocks. Laboratory tests reveal that the caterpillars can live successfully when submerged for weeks or vise versa.
This PNAS story was reported in ScienceNOW: http://news.sciencemag.org/sciencenow/2010/03/landlubber-caterpillars-take-to-.html