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Programmed genome rearrangements in the unicellular eukaryote Oxytricha trifallax produce a transcriptionally active somatic nucleus from a copy of its germline nucleus during development. This process eliminates noncoding sequences that interrupt coding regions in the germline genome, and joins over 225,000 remaining DNA segments, some of which require inversion or complex permutation to build functional genes. This dynamic genomic organization permits some single DNA segments in the germline to contribute to multiple, distinct somatic genes via alternative processing. Like alternative mRNA splicing, the combinatorial assembly of DNA segments contributes to genetic variation and facilitates the evolution of new genes. In this study, we use comparative genomic analysis to demonstrate that the emergence of alternative DNA splicing is associated with the origin of new genes. Short duplications give rise to alternative gene segments that are spliced to the shared gene segments. Alternative gene segments evolve faster than shared, constitutive segments. Genes with shared segments frequently have different expression profiles, permitting functional divergence. This study reports alternative DNA splicing as a mechanism of new gene origination, illustrating how the process of programmed genome rearrangement gives rise to evolutionary innovation.