Fungi in the basidiomycete genusMalasseziaare the most prevalent eukaryotic microbes resident on the skin of human and other warm-blooded animals and have been implicated in skin diseases and systemic disorders. Analysis ofMalasseziagenomes revealed that key adaptations to the skin microenvironment have a direct genomic basis, and the identification of mating and meiotic genes suggests a capacity to reproduce sexually, even though no sexual cycle has been as yet observed. In contrast to other bipolar or tetrapolar basidiomycetes that have either two linked mating-type-determining (MAT) loci or twoMATloci on separate chromosomes, inMalasseziaspecies studied thus far the twoMATloci are arranged in a pseudobipolar configuration (linked on the same chromosome but capable of recombining). By incorporating newly-generated chromosome-level genome assemblies, and an improvedMalasseziaphylogeny, we infer that the pseudobipolar arrangement was the ancestral state of this group and revealed six independent transitions to tetrapolarity, seemingly driven by centromere fission or translocations in centromere-flanking regions. Additionally, in an approach to uncover a sexual cycle,Malassezia furfurstrains were engineered to express differentMATalleles in the same cell. The resulting strains produce hyphae reminiscent of early steps in sexual development and display upregulation of genes associated with sexual development as well as others encoding lipases and a protease potentially relevant for pathogenesis of the fungus. Our study reveals a previously unseen genomic relocation of mating-type loci in fungi and provides insight towards the discovery of a sexual cycle inMalassezia, with possible implications for pathogenicity.