Horizontal gene transfer (HGT) is an important mechanism by which prokaryotes acquire new genes. In eukaryotes, few examples of HGT have been documented, and the role of HGT in eukaryotic evolution is poorly understood. In order to aid our understanding of the role of HGT in eukaryotic evolution, I conducted a systematic genome-level search for horizontally acquired genes in fungi combined with functional characterization of some of these genes discovered in Saccharomyces cerevisiae (1). In order to determine the extent of HGT in a specific lineage, I employed whole genome comparisons between fungal species and a compiled prokaryotic genome database to identify genes of recent bacterial origin in S. cerevisiae and Ashbya gossypii (2). Similar whole genome comparisons were performed for 44 additional fungi to find genes of recent bacterial origin in a broad sample of the fungal kingdom. I found that HGT is rare but omnipresent amongst the fungi with all examined fungal genomes containing recently acquired prokaryotic genes. Four genes found in S. cerevisiae (URA1, BDS1, IRC4, and BIO1) were experimentally investigated to characterize their function. In S. cerevisiae, genes acquired from bacteria are involved in a wide range of cellular processes including the syntheses of uracil and biotin, the degradation of organic sulfur compounds, and protection from ultra-violet radiation (3). This work is the first systematic examination of horizontal gene transfer in a eukaryotic lineage, and shows that HGT is an important mechanism of metabolic innovation. Horizontal gene transfer allows fungi to acquire novel metabolic characteristic and re-acquire lost metabolic capabilities. Horizontally acquired genes illuminate aspects of the biology of an organism in two ways; the function of the gene itself suggests functions necessary in the species for the colonization of new environments and the optimization of the organism for this particular niche. In addition, the donor species as well as the host typically share the same environment, a clue to the range of habitats and environments in which fungal species may be found. These results suggest that HGT plays a significant role in the ongoing evolution of the fungi.