American dagger moths (Acronicta americana) are a fairly nondescript gray moth, perfect for camouflaging itself against mottled tree trunks during the day (see this BugGuide link for pictures of adult American dagger moths). The caterpillar of the species, on the other hand, is one of the fluffiest larval lepidopterans I’ve ever encountered. It is covered in dense hairs, called setae, which are yellow in younger instars and turn white as the caterpillar ages. There are also longer pairs of black bristles, like long eyelashes, at the first and third abdominal segment, and a single longer tuft of black hair on the eighth segment. An American dagger moth caterpillar can reach a length of approximately 2 inches. 

The caterpillar can be found between June and October in deciduous forests. It has a fairly large range of host plants, feeding on the leaves of alder, ash, birch, elm, hickory, maple, oak, poplar, walnut, and willow. In fact, the caterpillar photographed here was on a blueberry shrub. 

Although this caterpillar looks soft and fuzzy, the bristles can break off and embed themselves into skin if the caterpillar is handled, causing skin irritation due to the toxins stored inside the hairs.