The bacterial endosymbiont Wolbachia manipulates arthropod reproduction to facilitate its maternal spread through host populations. The most common manipulation is cytoplasmic incompatibility (CI): Wolbachia-infected males produce modified sperm that cause embryonic mortality, unless rescued by embryos harboring the same Wolbachia. The genes underlying CI, cifA and cifB, were recently identified in the eukaryotic association module of Wolbachia’s prophage WO. Here, we use transcriptomic and genomic approaches to address three important evolutionary facets of the cif genes. First, we assess whether or not cifA and cifB comprise a classic toxin–antitoxin operon in wMel and show that the two genes exhibit striking, transcriptional differences across host development. They can produce a bicistronic message despite a predicted hairpin termination element in their intergenic region. Second, cifA and cifB strongly coevolve across the diversity of phage WO. Third, we provide new domain and functional predictions across homologs within Wolbachia, and show that amino acid sequences vary substantially across the genus. Finally, we investigate conservation of cifA and cifB and find frequent degradation and loss of the genes in strains that no longer induce CI. Taken together, we demonstrate that cifA and cifB exhibit complex transcriptional regulation in wMel, provide functional annotations that broaden the potential mechanisms of CI induction, and report recurrent erosion of cifA and cifB in non-CI strains, thus expanding our understanding of the most widespread form of reproductive parasitism.