The Magadi tilapia (Alcolapia grahami) is a cichlid fish that inhabits one of the Earth's most extreme aquatic environments, with high pH ( -10), salinity (-60 % of seawater), high temperatures ( -40 °C), and fluctuating oxygen regimes. The Magadi tilapia evolved several unique behavioral, physiological, and anatomical adaptations, some of which are constituent and thus retained in freshwater conditions. We conducted a transcriptomic analysis on A. grahami to study the evolutionary basis of tolerance to multiple stressors. To identify the adaptive regulatory changes associated with stress responses, we massively sequenced gill transcriptomes (RNAseq) from wild and freshwater-acclimated specimens of A. grahami. As a control, corresponding transcriptome data from Oreochromis leucostictus, a closely related freshwater species, were generated. We found expression differences in a large number of genes with known functions related to osmoregulation, energy metabolism, ion transport, and chemical detoxification. Over-representation of metabolism-related gene ontology terms in wild individuals compared to laboratory-acclimated specimens suggested that freshwater conditions greatly decrease the metabolic requirements of this species. Twenty-five genes with diverse physiological functions related to responses to water stress showed signs of divergent natural selection between the Magadi tilapia and its freshwater relative, which shared a most recent common ancestor only about four million years ago. The complete set of genes responsible for urea excretion was identified in the gill transcriptome of A. grahami, making it the only fish species to have a functional ornithine-urea cycle pathway in the gills a major innovation for increasing nitrogenous waste efficiency.