Genome sequencing and subsequent global gene expression studies have advanced our understanding of the lignocellulose-fermenting yeast Pichia stipitis. These studies have provided an insight into its central carbon metabolism, and analysis of its genome has revealed numerous functional gene clusters and tandem repeats. Specialized physiological traits are often the result of several gene products acting together. When coinheritance is necessary for the overall physiological function, recombination and selection favor colocation of these genes in a cluster. These are particularly evident in strongly conserved and idiomatic traits. In some cases, the functional clusters consist of multiple gene families. Phylogenetic analyses of the members in each family show that once formed, functional clusters undergo duplication and differentiation. Genome-wide expression analysis reveals that regulatory patterns of clusters are similar after they have duplicated and that the expression profiles evolve along with functional differentiation of the clusters. Orthologous gene families appear to arise through tandem gene duplication, followed by differentiation in the regulatory and coding regions of the gene. Genome-wide expression analysis combined with cross-species comparisons of functional gene clusters should reveal many more aspects of eukaryotic physiology.