A young American Dagger Moth Caterpillar (Acronicta americana) looking dapper in his bright yellow and black bristly hairs (setae).
...he is soft, he is fuzzy, but don't touch! Those silky looking hairs and tufts can leave stinging welts!
The American Dagger Moth caterpillar doesn't sting like a wasp or bee. It doesn't have a stinger at all. The fuzzy hairs (setae) are hollow, and when they touch the skin, they break away releasing toxins from poison glands to which they are attached. (Click here for details on "stinging" caterpillars.)
The toxin-wielding setae make me think of deadly little straws...like something out of James Bond...sort of. It's not like these caterpillars are "attack" caterpillars. They don't release their toxins on purpose. The toxins just spill out when the hair is broken.