BACKGROUND: Orthologs and paralogs are widely used terms in modern comparative genomics. Existing procedures for resolving orthologous/paralogous relationships are often based on manual revision of clusters of orthologous groups and/or lack any rigorous evolutionary base. DESCRIPTION: We developed a completely automated procedure that creates clusters of orthologous groups at each node of the taxonomy tree (PHOGs--Phylogenetic Orthologous Groups). As a result of this procedure, a tree of orthologous groups was obtained. Each cluster is a "supergene" and it is represented by an "ancestral" sequence obtained from the multiple alignment of orthologous and paralogous genes. The procedure has been applied to the taxonomy tree of organisms from all three domains of life. Protein complements from 50 bacterial, archaeal and eukaryotic species were used to create PHOGs at all tree nodes. 51367 PHOGs were obtained at the root node. CONCLUSION: The PHOG database demonstrates that it is possible to automatically process any number of sequenced genomes and to reconstruct orthologous and paralogous relationships between genomes using a rigorous evolutionary approach. This database can become a very useful tool in various areas of comparative genomics.