Sponges have several cell types:

Choanocytes (also known as "collar cells"), flagellated cells that function as the sponge's digestive system, are remarkably similar to the protistan choanoflagellates. The collars are composed of microvilli and are used to filter particles out of the water. The beating of the choanocytes’ flagella creates the sponge’s water current.

Porocytes are tubular cells that make up the pores into the sponge body through the mesohyl.

Pinacocytes which form the pinacoderm, the outer epidermal layer of cells. This is the closest approach to true tissue in sponges.

Myocytes are modified pinacocytes which control the size of the osculum and pore openings and thus the water flow.

Archaeocytes (or amoebocytes) have many functions; they are totipotent cells which can transform into sclerocytes, spongocytes, or collencytes. They also have a role in nutrient transport and sexual reproduction.

Sclerocytes secrete calcareous or siliceous spicules which reside in the mesohyl.

Spongocytes secrete spongin, collagen-like fibers which make up the mesohyl.

Collencytes secrete collagen.

Spicules are stiffened rods or spikes made of calcium carbonate or silica which are used for structure and defense.

Cells are arranged in a gelatinous non-cellular matrix called mesohyl.

Sponges have no real circulatory system; however the water current is used for circulation. Dissolved gases are brought to cells and enter the cells via simple diffusion. Metabolic wastes are also transferred to the water through diffusion.

Sponges pump remarkable amounts of water. Leuconia, for example, is a small leuconoid sponge about 10 cm tall and 1 cm in diameter. It is estimated that water enters through more than 80,000 incurrent canals at a speed of 6cm per minute. However, because Leuconia has more than 2 million flagellated chambers whose combined diameter is much greater than that of the canals, water flow through chambers slows to 3.6cm per hour. Such a flow rate allows easy food capture by the collar cells. All water is expelled through a single osculum at a velocity of about 8.5 cm/second: a jet force capable of carrying waste products some distance away from the sponge.

Sponges have no respiratory or excretory organs; both functions occur by diffusion in individual cells. Contractile vacuoles are found in archaeocytes and choanocytes of freshwater sponges. The only visible activities and responses in sponges, other than propulsion of water, are slight alterations in shape and closing and opening of incurrent and excurrent pores, and these movements are very slow.

Sponges are able to reproduce sexually or asexually. Most sponges are monoecious. Sperm are formed from choanocytes; and oocytes derive from choanocytes in some sponges, and archaeocytes in others. Sperm are released into open water. Some sponges have oviparous fertilization where sperm and eggs meet in open water. In other species sperm are taken into the bodies of other sponges and fertilized inside; this is known as viviparous fertilization. The free-swimming larvae, known as parenchymula, serve as one of the main forms of dispersal for this largely sessile phylum. Asexual reproduction of sponges is through budding or fragmentation, when a small piece of sponge falls off of the main sponge and grows into a new one. Many freshwater sponges form small structures known as gemmules, which function as overwintering devices. These are similar to a bacterium's endospore. Gemmules are made up of amoebocytes surrounded by a layer of spicules and can survive conditions that would kill adult sponges. When the environment becomes less hostile, the gemmule resumes growing.

In common usage, the term sponge is usually applied to the skeletons of these creatures alone, from which the animal matter has been removed by maceration and washing. The material of which these sponges are composed is spongin. Calcareous and siliceous sponges are too harsh for similar use. Commercial sponges are derived from various species and come in many grades, from fine soft "lamb's wool" sponges to the coarse grades used for washing cars. The luffa sponge, also spelled "loofah," commonly sold for use in the kitchen or the shower, is not related to any animal sponge but is derived instead from the locules of a pepo fruit (Cucurbitaceae). Marine sponges come from fisheries in the Mediterranean and West Indies. The manufacture of rubber, plastic and cellulose based synthetic sponges has significantly reduced the commercial sponge fishing industry over recent years. Additionally, synthetic sponge products can be up to 10 percent more effective at retaining liquids, as compared to a natural sponge.