Evolutionary rate covariation (ERC) is a phylogenetic signature that reflects the covariation of a pair of proteins over evolutionary time. ERC is typically elevated between interacting proteins and so is a promising signature to characterize molecular and functional interactions across the genome. ERC is often assumed to result from compensatory changes at interaction interfaces (i.e., intermolecular coevolution); however, its origin is still unclear and is likely to be complex. Here, we determine the biological factors responsible for ERC in a proteome-wide data set of 4459 proteins in 18 budding yeast species. We show that direct physical interaction is not required to produce ERC, because we observe strong correlations between noninteracting but cofunctional enzymes. We also demonstrate that ERC is uniformly distributed along the protein primary sequence, suggesting that intermolecular coevolution is not generally responsible for ERC between physically interacting proteins. Using multivariate analysis, we show that a pair of proteins is likely to exhibit ERC if they share a biological function or if their expression levels coevolve between species. Thus, ERC indicates shared function and coexpression of protein pairs and not necessarily coevolution between sites, as has been assumed in previous studies. This full interpretation of ERC now provides us with a powerful tool to assign uncharacterized proteins to functional groups and to determine the interconnectedness between entire genetic pathways.