Our understanding of prokaryote-eukaryote symbioses as a source of evolutionary innovation has been rapidly increased by the advent of genomics, which has made possible the biological study of uncultivable endosymbionts. Genomics is allowing the dissection of the evolutionary process that starts with host invasion then progresses from facultative to obligate symbiosis and ends with replacement by, or coexistence with, new symbionts. Moreover, genomics has provided important clues on the mechanisms driving the genome-reduction process, the functions that are retained by the endosymbionts, the role of the host, and the factors that might determine whether the association will become parasitic or mutualistic.