Understanding the evolutionary relationship between genome content and ecological niche is one of the fundamental challenges of biology. The distinct physiologies of yeast species provide a window into how genomes evolve in concert with niche. Although the enzymes of the well studied yeast galactose utilization pathway are present in all domains of life, we have found that multiple genes of the GAL pathway are absent from four yeast species that cannot use galactose. Whereas three species lack any trace of the pathway except a single gene, Saccharomyces kudriavzevii, a close relative of Saccharomyces cerevisiae, retains remnants of all seven dedicated GAL genes as syntenic pseudogenes, providing a rare glimpse of an entire pathway in the process of degeneration. An estimate of the timing of gene inactivation suggests that pathway degeneration began early in the lineage and proceeded rapidly. S. kudriavzevii exhibits several other divergent physiological properties that are associated with a shift in ecological niche. These results suggest that rapid and irreversible gene inactivation and pathway degeneration are associated with adaptation to new ecological niches in natural populations. Inactivated genes may generally serve as markers of specific functions made dispensable by recent adaptive shifts.