Sponges (Porifera) are among the simplest living and the earliest branching metazoans. They hold a pivotal role for studying genome evolution of the entire metazoan branch, both as an outgroup to Eumetazoa and as the closest branching phylum to the common ancestor of all multicellular animals (Urmetazoa). In order to assess the transcription inventory of sponges, we sequenced expressed sequence tag libraries of two demosponge species, Suberites domuncula and Lubomirskia baicalensis, and systematically analyzed the assembled sponge transcripts against their homologs from complete proteomes of six well-characterized metazoans—Nematostella vectensis, Caenorhabditis elegans, Drosophila melanogaster, Strongylocentrotus purpuratus, Ciona intestinalis, and Homo sapiens. We show that even the earliest metazoan species already have strikingly complex genomes in terms of gene content and functional repertoire and that the rich gene repertoire existed even before the emergence of true tissues, therefore further emphasizing the importance of gene loss and spatio-temporal changes in regulation of gene expression in shaping the metazoan genomes. Our findings further indicate that sponge and human genes generally show similarity levels higher than expected from their respective positions in metazoan phylogeny, providing direct evidence for slow rate of evolution in both “basal” and “apical” metazoan genome lineages. We propose that the ancestor of all metazoans had already had an unusually complex genome, thereby shifting the origins of genome complexity from Urbilateria to Urmetazoa.