ORNAMENTALS AND TURF
From: Steve Frank, Extension EntomologistAzalea Caterpillars
Azalea caterpillars, Datana major, are among our most attractive caterpillar species. They feed primarily on Rhododendron spp. and are most evident late in the summer. There is one generation of this pest each year. Adults lay eggs on the underside of azalea leaves where the small caterpillars feed gregariously. As they grow the caterpillars take on the coloration seen in the picture below. Unfortunately, by the time they are noticed azalea caterpillars can consume a lot of foliage and defoliate a shrub. Scout for these caterpillars by scanning shrubs for bare twigs then look closer to investigate. If you find a group of them just prune the branch out. In larger infestations or nurseries there are several insecticides active on caterpillars but any product works best on small stages.
Information can be found at http://www.ces.ncsu.edu/depts/ent/notes/O&T/shrubs/note07/note07.html.
For more information contact your local Cooperative Extension Center and ask for the Commercial Horticulture Agent.