Based largely upon analysis of ribosomal RNA, a third domain of life, called archaea, had been proposed in addition to bacteria and eukaryotes. However, quantitative analysis of 73 whole genomes shows only a two-domain division of life: into eukaryotes and prokaryotes. Thousands of orthologous genes in archaea and bacteria show an essentially unimodal distribution of sequence identities. Thus, whole genome analyses indicate that archaea are a phylum of bacteria rather than a separate domain of life. In contrast, archaeal rRNA and that of hyperthermophilic bacteria differ from the rRNA of mesophilic bacteria. Thus, there is a bimodal distribution of rRNA sequence identities which differ by 12%. This discrepancy in rRNA and gene content based analyses of whole genomes is likely due to a 15% elevated C:G content of the rRNA of archaea and hyperthermophilic bacteria. The elevated C:G content is consistent with stabilization against thermal denaturation caused by additional hydrogen bonding (3 bonds) in C:G pairs compared to A:U pairs (2 bonds). Based upon this premise, there is no reliable way to correct rRNA for such differences in base composition and it is not possible to quantitatively compare hyperthermophiles with mesophiles by the rRNA method. Furthermore, quantitative study of whole genomes shows that the extent of change in both bacterial and archaeal genes, including rRNA, has reached a limit. Thus, direct sequence comparisons work with closely related genomes, but it is not possible to differentiate the most divergent prokaryotic species, which are currently designated as separate phyla. We believe that the differences in characteristics of archaeal species is based primarily upon selection of genes and pathways compatible with the extreme environmental lifestyle, i.e., hyperthermophily.