Arbuscular mycorrhizal fungi (AMF, Glomeromycota) colonize roots of the majority of terrestrial plants. They provide essential minerals to their plant hosts and receive photosynthates in return. All major lineages of AMF harbor endobacteria classified as Mollicutes, and known as mycoplasma-related endobacteria (MRE). Except for their substantial intrahost genetic diversity and ability to transmit vertically, virtually nothing is known about the life history of these endobacteria. To understand MRE biology, we sequenced metagenomes of three MRE populations, each associated with divergent AMF hosts. We found that each AMF species harbored a genetically distinct group of MRE. Despite vertical transmission, all MRE populations showed extensive chromosomal rearrangements, which we attributed to genetic recombination, activity of mobile elements, and a history of plectroviral invasion. The MRE genomes are characterized by a highly reduced gene content, indicating metabolic dependence on the fungal host, with the mechanism of energy production remaining unclear. Several MRE genes encode proteins with domains involved in protein-protein interactions with eukaryotic hosts. In addition, the MRE genomes harbor genes horizontally acquired from AMF. Some of these genes encode small ubiquitin-like modifier (SUMO) proteases specific to the SUMOylation systems of eukaryotes, which MRE likely use to manipulate their fungal host. The extent of MRE genome plasticity and reduction, along with the large number of horizontally acquired host genes, suggests a high degree of adaptation to the fungal host. These features, together with the ubiquity of the MRE-Glomeromycota associations, emphasize the significance of MRE in the biology of Glomeromycota.genome contraction | genome plasticity | horizontal gene transfer | vertical transmission A rbuscular mycorrhizal fungi (AMF) of the phylum Glomeromycota are obligate biotrophs that form mutualistic associations with the roots of the majority of terrestrial plant species (1). AMF provide essential mineral nutrients from the soil to the plant host and receive up to 20% of the plant's photosynthetic energy in return. AMF are emerging as an integral component of sustainable agriculture, with the goal of optimizing mycorrhizal associations in crop plants as an alternative to the use of nonrenewable mineral fertilizers (2).For almost half a century, AMF have been known to harbor morphologically diverse bacteria in their hyphae and spores (3). Recently, representatives of one of these morphotypes have been identified as novel members of the class Mollicutes (4) and are referred to as mycoplasma-related endobacteria (MRE). All Mollicutes are intimate associates of eukaryote hosts (5), acting as parasites or, rarely, as mutualists (6). They are characterized by reductive evolution and minimal genomes. MRE are the first Mollicutes to be found associated with fungi. They reside directly in the host cytoplasm and have been detected in all major lineages of Glomeromycota worldwide (4, 7). Molecular ev...