Based on genome-to-genome analyses of gene sequences obtained from plant-parasitic, root-knot nematodes (Meloidogyne spp.), it seems likely that certain genes have been derived from bacteria by horizontal gene transfer. Strikingly, a common theme underpinning the function of these genes is their apparent direct relationship to the nematodes' parasitic lifestyle. Phylogenetic analyses implicate rhizobacteria as the predominant group of 'gene donor' bacteria. Root-knot nematodes and rhizobia occupy similar niches in the soil and in roots, and thus the opportunity for genetic exchange may be omnipresent. Further, both organisms establish intimate developmental interactions with host plants, and mounting evidence suggests that the mechanisms for these interactions are shared too. We propose that the origin of parasitism in Meloidogyne may have been facilitated by acquisition of genetic material from soil bacteria through horizontal transfer, and that such events represented key steps in speciation of plant-parasitic nematodes. To further understand the mechanisms of horizontal gene transfer, and also to provide experimental tools to manipulate this promising bio-control agent, we have initiated a genomic sequence of the bacterial hyper-parasite of plant parasitic nematodes, Pasteuria penetrans. Initial data have established that P. penetrans is closely related to Bacillus spp., to the extent that considerable genome synteny is apparent. Hence, Bacillus serves as a model for Pasteuria, and vice versa.