The pinewood nematode Bursaphelenchus xylophilus has caused severe damage to pine forests in large parts of the world. Dispersal of this plant-parasitic nematode occurs when the nematode develops into the dispersal fourth larval stage (L_IV) upon encountering its insect vector, the Monochamus pine sawyer beetle, inside an infected pine tree. Here, we show that L_IV formation in B. xylophilus is induced by C16 and C18 fatty acid ethyl esters (FAEEs), which are produced abundantly on the body surface of the vector beetle specifically during the late development pupal, emerging adult, and newly eclosed adult stages. The L_IV can then enter the tracheal system of the adult beetle for dispersal to a new pine tree. Treatment of B. xylophilus with long-chain FAEEs, or the PI3 kinase inhibitor LY294002, promotes L_IV formation, while Δ⁷-dafachronic acid blocks the effects of these chemicals, suggesting a conserved role for the insulin/IGF-1 and DAF-12 pathways in L_IV formation. Our work provides a mechanism by which L_IV formation in B. xylophilus is specifically coordinated with the life cycle of its vector beetle. Knowledge of the chemical signals that control the L_IV developmental decision could be used to interfere with the dispersal of this plant-parasitic nematode.