Understanding how microalgae adapt to rapidly changing environments is not only important to science but can help clarify the potential impact of climate change on the biology of primary producers. We sequenced and analyzed the nuclear genome of multiple Picochlorum isolates (Chlorophyta) to elucidate strategies of environmental adaptation. It was previously found that coordinated gene regulation is involved in adaptation to salinity stress, and here we show that gene gain and loss also play key roles in adaptation. We determined the extent of horizontal gene transfer (HGT) from prokaryotes and their role in the origin of novel functions in the Picochlorum clade. HGT is an ongoing and dynamic process in this algal clade with adaptation being driven by transfer, divergence, and loss. One HGT candidate that is differentially expressed under salinity stress is indolepyruvate decarboxylase that is involved in the production of a plant auxin that mediates bacteria-diatom symbiotic interactions. Large differences in levels of heterozygosity were found in diploid haplotypes among Picochlorum isolates. Biallelic divergence was pronounced in P. oklahomensis (salt plains environment) when compared with its closely related sister taxon Picochlorum SENEW3 (brackish water environment), suggesting a role of diverged alleles in response to environmental stress. Our results elucidate how microbial eukaryotes with limited gene inventories expand habitat range from mesophilic to halophilic through allelic diversity, and with minor but important contributions made by HGT. We also explore how the nature and quality of genome data may impact inference of nuclear ploidy.