Abstract Background A primary objective of comparative genomics is to identify genomic elements of functional significance that contribute to phenotypic diversity. Complex changes in genome structure (insertions, duplications, rearrangements, translocations) may be widespread, and have important effects on organismal diversity. Any survey of genomic variation is incomplete without an assessment of structural changes. Results We re-examine the genome sequences of the diverged species Drosophila melanogaster and D. pseudoobscura to identify fine-scale structural features that distinguish the genomes. We detect 95 large insertion/deletion events that occur within the introns of orthologous gene pairs, the majority of which represent insertion of transposable elements. We also identify 143 microinversions below 5 kb in size. These microinversions reside within introns or just upstream or downstream of genes, and invert conserved DNA sequence. The sequence conservation within microinversions suggests they may be enriched for functional genetic elements, and their position with respect to known genes implicates them in the regulation of gene expression. Although we found a distinct pattern of GC content across microinversions, this was indistinguishable from the pattern observed across blocks of conserved non-coding sequence. Conclusion Drosophila has long been known as a genus harboring a variety of large inversions that disrupt chromosome colinearity. Here we demonstrate that microinversions, many of which are below 1 kb in length, located in/near genes may also be an important source of genetic variation in Drosophila. Further examination of other Drosophila genome sequences will likely identify an array of novel microinversion events.