Microsporidia are obligate intracellular parasites infesting many animal groups. Lacking mitochondria and peroxysomes, these unicellular eukaryotes were first considered a deeply branching protist lineage that diverged before the endosymbiotic event that led to mitochondria. The discovery of a gene for a mitochondrial-type chaperone combined with molecular phylogenetic data later implied that microsporidia are atypical fungi that lost mitochondria during evolution. Here we report the DNA sequences of the 11 chromosomes of the approximately 2.9-megabase (Mb) genome of Encephalitozoon cuniculi (1,997 potential protein-coding genes). Genome compaction is reflected by reduced intergenic spacers and by the shortness of most putative proteins relative to their eukaryote orthologues. The strong host dependence is illustrated by the lack of genes for some biosynthetic pathways and for the tricarboxylic acid cycle. Phylogenetic analysis lends substantial credit to the fungal affiliation of microsporidia. Because the E. cuniculi genome contains genes related to some mitochondrial functions (for example, Fe-S cluster assembly), we hypothesize that microsporidia have retained a mitochondrion-derived organelle.