Fossil data indicate that the seminal events in animal evolution occurred over 600 million years ago, yet the first animals were likely microscopic and soft-bodied, providing little fossil evidence for their biology and morphology. To bridge the gap in our understanding of early animal evolution, we can compare the gene content of animals to that of choanoflagellates, a globally distributed group of microbial eukaryotes that are the closest living relatives of animals. Previously, genome sequencing of two species of choanoflagellates provided a valuable initial reconstruction of early animal biology, but the two sequenced species are relatively closely related, leaving the majority of choanoflagellate diversity unrepresented. We sequenced the transcriptomes of 19 additional choanoflagellate species selected for their phylogenetic diversity, greatly increasing estimates of the gene content of the common ancestor of choanoflagellates and animals. We detect numerous genes in choanoflagellates that were previously found only in animals, including homologs of Toll-like receptors and the NF-κB family of transcription factors, which are key components of animal innate immunity. In addition, we find genes encoding a hyaluronidase enzyme that is responsible for extracellular matrix modulation in animals and induces a change in cell number within multicelled colonies of the choanoflagellate Salpingoeca napiformis. We find that genes lost on the lineage leading to animals are significantly enriched for metabolic function. We identify genes shared exclusively among choanoflagellates and sponges that may underlie the biology of choanocytes, likely the earliest animal cell type. Finally, we demonstrate that Argonaute and Dicer, critical components of the RNAi gene silencing pathway in eukaryotes that were not detected in the first two choanoflagellate species to be sequenced, are both present in choanoflagellates.