During the course of a pilot genome project for the ciliate Oxytricha trifallax, we discovered a fusion gene never before described in any taxa. This gene, FSF1, encodes a putative fusion protein comprising an entire formaldehyde dehydrogenase (FALDH) homolog at one end and an S-formylglutathione hydrolase (SFGH) homolog at the other, two proteins that catalyze serial steps in the formaldehyde detoxification pathway. We confirmed the presence of the Oxytricha fusion gene in vivo and detected transcripts of the full-length fusion gene. A survey of other large-scale sequencing projects revealed a similar fusion protein in a distantly related ciliate, Tetrahymena thermophila, and a possible fusion of these two genes in the diatoms Phaeodactylum tricornutum and Thalassiosira pseudonana, but in the reverse order, with the SFGH domain encoded upstream of the FALDH domain. Orthologs of these fusion proteins may be widespread within the ciliates and diatoms.