Using the genomic sequences of Drosophila melanogaster subgroup, the pattern of gene duplications was investigated with special attention to interlocus gene conversion. Our fine-scale analysis with careful visual inspections enabled accurate identification of a number of duplicated blocks (genomic regions). The orthologous parts of those duplicated blocks were also identified in the D. simulans and D. sechellia genomes, by which we were able to clearly classify the duplicated blocks into post- and pre-speciation blocks. We found 31 post-speciation duplicated genes, from which the rate of gene duplication (from one copy to two copies) is estimated to be 1.0 x 10(-9) per single-copy gene per year. The role of interlocus gene conversion was observed in several respects in our data: (1) synonymous divergence between a duplicated pair is overall very low. Consequently, the gene duplication rate would be seriously overestimated by counting duplicated genes with low divergence; (2) the sizes of young duplicated blocks are generally large. We postulate that the degeneration of gene conversion around the edges could explain the shrinkage of "identifiable" duplicated regions; and (3) elevated paralogous divergence is observed around the edges in many duplicated blocks, supporting our gene conversion-degeneration model. Our analysis demonstrated that gene conversion between duplicated regions is a common and genome-wide phenomenon in the Drosophila genomes, and that its role should be especially significant in the early stages of duplicated genes. Based on a population genetic prediction, we applied a new genome-scan method to test for signatures of selection for neofunctionalization and found a strong signature in a pair of transporter genes.