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Abstract Tardigrada is an ancient lineage of miniaturized animals. As an outgroup of the well‐studied Arthropoda and Onychophora, studies of tardigrades hold the potential to reveal important insights into body plan evolution in Panarthropoda. Previous studies have revealed interesting facets of tardigrade development and genomics that suggest that a highly compact body plan is a derived condition of this lineage, rather than it representing an ancestral state of Panarthropoda. This conclusion was based on studies of several species from Eutardigrada. We review these studies and expand on them by analyzing the publicly available genome and transcriptome assemblies ofEchiniscus testudo, a representative of Heterotardigrada. These new analyses allow us to phylogenetically reconstruct important features of genome evolution in Tardigrada. We use available data from tardigrades to interrogate several recent models of body plan evolution in Panarthropoda. Although anterior segments of panarthropods are highly diverse in terms of anatomy and development, both within individuals and between species, we conclude that a simple one‐to‐one alignment of anterior segments across Panarthropoda is the best available model of segmental homology. In addition to providing important insight into body plan diversification within Panarthropoda, we speculate that studies of tardigrades may reveal generalizable pathways to miniaturization.