Analyses of genome sequences have revealed a surprisingly variable distribution of genes, reflecting the generation of novel genes, lateral gene transfer and gene loss. The impact of gene loss on organisms has been difficult to examine, but the loss of protein coding genes, the loss of domains within proteins and the divergence of genes have made surprising contributions to the differences among organisms. This paper reviews surveys of gene loss and divergence in fungal and archaeal genomes that indicate suites of functionally related genes tend to undergo loss and divergence. Instances of fungal gene loss highlighted here suggest that specific cellular systems have changed, such as Ca 2+ biology in Saccharomyces cerevisiae and peroxisome function in Schizosaccharomyces pombe. Analyses of loss and divergence can provide specific predictions regarding protein-protein interactions, and the relationship between networks of protein interactions and loss may form a part of a parametric model of genome evolution.