Sequencing of multiple related species followed by comparative genomics analysis constitutes a powerful approach for the systematic understanding of any genome. Here, we use the genomes of 12 Drosophila species for the de novo discovery of functional elements in the fly. Each type of functional element shows characteristic patterns of change, or 'evolutionary signatures', dictated by its precise selective constraints. Such signatures enable recognition of new protein-coding genes and exons, spurious and incorrect gene annotations, and numerous unusual gene structures, including abundant stop-codon readthrough. Similarly, we predict non-protein-coding RNA genes and structures, and new microRNA (miRNA) genes. We provide evidence of miRNA processing and functionality from both hairpin arms and both DNA strands. We identify several classes of pre-and post-transcriptional regulatory motifs, and predict individual motif instances with high confidence. We also study how discovery power scales with the divergence and number of species compared, and we provide general guidelines for comparative studies.The sequencing of the human genome and the genomes of dozens of other metazoan species has intensified the need for systematic methods to extract biological information directly from DNA sequence. Comparative genomics has emerged as a powerful methodology for this endeavour 1,2 . Comparison of few (two-four) closely related genomes has proven successful for the discovery of protein-coding genes 3-5 , RNA genes 6,7 , miRNA genes 8-11 and catalogues of regulatory elements 3,4,12-14 . The resolution and discovery power of these studies should increase with the number of genomes [15][16][17][18][19][20] , in principle enabling the systematic discovery of all conserved functional elements.The fruitfly Drosophila melanogaster is an ideal system for developing and evaluating comparative genomics methodologies. Over the past century, Drosophila has been a pioneering model in which many of the basic principles governing animal development and population biology were established 21 . In the past decade, the genome sequence of D. melanogaster provided one of the first systematic views *These authors contributed equally to this work. {Lists of participants and affiliations appear at the end of the paper.