Great guess, but this is actually a real-life spicebush swallowtail (Papilio troilus) caterpillar!
The caterpillar looks so much like Caterpie, a Pokémon, that we think the artists must have based their character on this real-life species!
We had no idea what kind of insect, worm, alien, or other life form it was, but the caterpillar’s identity did not remain a mystery for long. A friend and I went to a Monarch butterfly tag and release event at the Hudson Highlands Nature Museum, and one of the educators was able to identify it immediately as a spicebush swallowtail caterpillar by the prominent eyespots and coloring.
Friends in the eastern half of the US have probably seen the beautiful butterflies these guys transform into: