To study the genome-wide impact of transposable elements (TEs) on the evolution of protein-coding regions, we examined 13 799 human genes and found 533 (approximately 4%) cases of TEs within protein-coding regions. The majority of these TEs (approximately 89.5%) reside within 'introns' and were recruited into coding regions as novel exons. We found that TE integration often has an effect on gene function. In particular, there were two mouse genes whose coding regions consist largely of TEs, suggesting that TE insertion might create new genes. Thus, there is increasing evidence for an important role of TEs in gene evolution. Because many TEs are taxon-specific, their integration into coding regions could accelerate species divergence.