Over 130 years ago, James-Clark noted a remarkable structural similarity between the feeding cells of sponges (choanocytes) and a group of free-living protists, the choanoflagellates. Both cell types possess a single flagellum surrounded by a collar of fine tentacles. The similarity led to the hypothesis that sponges, and, by implication, other animals, evolved from choanoflagellate-like ancestors. Phylogenetic analysis of ribosomal DNA neither supports nor refutes this hypothesis. Here, we report the sequence of an hsp70 gene and pseudogene from the freshwater choanoflagellate Monosiga ovata. These represent the first nuclear-encoded protein-coding sequences reported for any choanoflagellate. We find that Monosiga and most bilaterian hsp70 genes have high GC contents that may distort phylogenetic tree construction; therefore, protein sequences were used for phylogenetic reconstruction. Our analyses indicate that Monosiga is more closely related to animals than to fungi. We infer that animals and at least some choanoflagellates are part of a clade that excludes the fungi. This is consistent with the origin of animals from a choanoflagellate-like ancestor.