Biochemical and cytogenetic experiments have led to the hypothesis that eukaryotic chromatin is organized into a series of distinct domains that are functionally independent. Two expectations of this hypothesis are: (i) adjacent genes are more frequently co-expressed than is expected by chance; and (ii) co-expressed neighbouring genes are often functionally related. Here we report that over 10% of Arabidopsis thaliana genes are within large, co-expressed chromosomal regions. Two per cent (497/22,520) of genes are highly co-expressed (r > 0.7), about five times the number expected by chance. These genes fall into 226 groups distributed across the genome, and each group typically contains two to three genes. Among the highly co-expressed groups, 40% (91/226) have genes with high amino acid sequence similarity. Nonetheless, duplicate genes alone do not explain the observed levels of co-expression. Co-expressed, non-homologous genes are transcribed in parallel, share functions, and lie close together more frequently than expected. Our results show that the A. thaliana genome contains domains of gene expression. Small domains have highly co-expressed genes that often share functional and sequence similarity and are probably co-regulated by nearby regulatory sequences. Genes within large, significantly correlated groups are typically co-regulated at a low level, suggesting the presence of large chromosomal domains.