In complex multicellular eukaryotes such as animals and plants, horizontal gene transfer is commonly considered rare with very limited evolutionary significance. Here we show that horizontal gene transfer is a dynamic process occurring frequently in the early evolution of land plants. Our genome analyses of the moss Physcomitrella patens identified 57 families of nuclear genes that were acquired from prokaryotes, fungi or viruses. Many of these gene families were transferred to the ancestors of green or land plants. Available experimental evidence shows that these anciently acquired genes are involved in some essential or plant-specific activities such as xylem formation, plant defence, nitrogen recycling as well as the biosynthesis of starch, polyamines, hormones and glutathione. These findings suggest that horizontal gene transfer had a critical role in the transition of plants from aquatic to terrestrial environments. On the basis of these findings, we propose a model of horizontal gene transfer mechanism in nonvascular and seedless vascular plants.