Fungi grow within their food, externally digesting it and absorbing nutrients across a semirigid chitinous cell wall. Members of the new phylum Cryptomycota were proposed to represent intermediate fungal forms, lacking a chitinous cell wall during feeding and known almost exclusively from ubiquitous environmental ribosomal RNA sequences that cluster at the base of the fungal tree [1, 2]. Here, we sequence the first Cryptomycotan genome (the water mold endoparasite Rozella allomycis) and unite the Cryptomycota with another group of endoparasites, the microsporidia, based on phylogenomics and shared genomic traits. We propose that Cryptomycota and microsporidia share a common endoparasitic ancestor, with the clade unified by a chitinous cell wall used to develop turgor pressure in the infection process [3, 4]. Shared genomic elements include a nucleotide transporter that is used by microsporidia for stealing energy in the form of ATP from their hosts [5]. Rozella harbors a mitochondrion that contains a very rapidly evolving genome and lacks complex I of the respiratory chain. These degenerate features are offset by the presence of nuclear genes for alternative respiratory pathways. The Rozella proteome has not undergone major contraction like microsporidia; instead, several classes have undergone expansion, such as host-effector, signal-transduction, and folding proteins.

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