Theileria annulata and T. parva are closely related protozoan parasites that cause lymphoproliferative diseases of cattle. We sequenced the genome of T. annulata and compared it with that of T. parva to understand the mechanisms underlying transformation and tropism. Despite high conservation of gene sequences and synteny, the analysis reveals unequally expanded gene families and species-specific genes. We also identify divergent families of putative secreted polypeptides that may reduce immune recognition, candidate regulators of host-cell transformation, and a Theileria-specific protein domain [frequently associated in Theileria (FAINT)] present in a large number of secreted proteins.