Cockayne syndrome (CS) is a devastating progeria most often caused by mutations in the CSB gene encoding a SWI/SNF family chromatin remodeling protein. Although all CSB mutations that cause CS are recessive, the complete absence of CSB protein does not cause CS. In addition, most CSB mutations are located beyond exon 5 and are thought to generate only C-terminally truncated protein fragments. We now show that a domesticated PiggyBac-like transposon PGBD3, residing within intron 5 of the CSB gene, functions as an alternative 3′ terminal exon. The alternatively spliced mRNA encodes a novel chimeric protein in which CSB exons 1–5 are joined in frame to the PiggyBac transposase. The resulting CSB-transposase fusion protein is as abundant as CSB protein itself in a variety of human cell lines, and continues to be expressed by primary CS cells in which functional CSB is lost due to mutations beyond exon 5. The CSB-transposase fusion protein has been highly conserved for at least 43 Myr since the divergence of humans and marmoset, and appears to be subject to selective pressure. The human genome contains over 600 nonautonomous PGBD3-related MER85 elements that were dispersed when the PGBD3 transposase was last active at least 37 Mya. Many of these MER85 elements are associated with genes which are involved in neuronal development, and are known to be regulated by CSB. We speculate that the CSB-transposase fusion protein has been conserved for host antitransposon defense, or to modulate gene regulation by MER85 elements, but may cause CS in the absence of functional CSB protein.