Prochlorococcus ecotypes are a useful system for exploring the origin and function of diversity among closely related microbes. The genetic variability between phenotypically distinct strains that differ by less that 1% in 165 ribosomal RNA sequences occurs mostly in genomic islands. Island genes appear to have been acquired in part by phage-mediated lateral gene transfer, and some are differentially expressed under light and nutrient stress. Furthermore, genome fragments directly recovered from ocean ecosystems indicate that these islands are variable among co-occurring Prochlorococcus cells. Genomic islands in this free-living photoautotroph share features with pathogenicity islands of parasitic bacteria, suggesting a general mechanism for niche differentiation in microbial species.