TET/JBP dioxygenases oxidize methylpyrimidines in nucleic acids and are implicated in generation of epigenetic marks and potential intermediates for DNA demethylation. We show that TET/JBP genes are lineage-specifically expanded in all major clades of basidiomycete fungi, with the majority of copies predicted to encode catalytically active proteins. This pattern differs starkly from the situation in most other organisms that possess just a single or a few copies of the TET/JBP family. In most basidiomycetes, TET/ JBP genes are frequently linked to a unique class of transposons, KDZ (Kyakuja, Dileera, and Zisupton) and appear to have dispersed across chromosomes along with them. Several of these elements typically encode additional proteins, including a divergent version of the HMG domain. Analysis of their transposases shows that they contain a previously uncharacterized version of the RNase H fold with multiple distinctive Zn-chelating motifs and a unique insert, which are predicted to play roles in structural stabilization and target sequence recognition, respectively. We reconstruct the complex evolutionary history of TET/JBPs and associated transposons as involving multiple rounds of expansion with concomitant lineage sorting and loss, along with several capture events of TET/ JBP genes by different transposon clades. On a few occasions, these TET/JBP genes were also laterally transferred to certain Ascomycota, Glomeromycota, Viridiplantae, and Amoebozoa. One such is an inactive version, calnexin-independence factor 1 (Cif1), from Schizosaccharomyces pombe, which has been implicated in inducing an epigenetically transmitted prion state. We argue that this unique transposon-TET/JBP association is likely to play important roles in speciation during evolution and epigenetic regulation. methylcytosine | fungal evolution | DNA modification | genomic association I ntragenomic conflicts with diverse mobile elements have played a critical role in shaping cellular genomes (1). In eukaryotes, genomic rearrangements mediated by transposons in germ-line cells promote reproductive isolation of organisms and, accordingly, are implicated in speciation events (2, 3). The mobility of transposons has the potential to disrupt genes by insertion as well as to create new genes or to resurrect inactive ones. Indeed, genomic analyses have revealed that transposons are an important source for both regulatory elements and new DNA-binding domains in transcription factors and chromatin proteins across the tree of life (1, 4). Organisms show a diverse array of strategies to counter mobile elements, supporting the idea of a constant arms race between them and genomes. Some of these strategies, such as transcriptional silencing by chromatin modifications (e.g., histone methylation, DNA methylation) and posttranscriptional silencing using components of the RNAi machinery, are widespread across eukaryotes (5). In contrast, processes such as DNA elimination in the macronuclei of ciliates show a restricted phyletic distribution (6). Transpos...