Genome comparisons indicate that horizontal gene transfer and differential gene loss are major evolutionary phenomena that, at least in prokaryotes, involve a large fraction, if not the majority, of genes. The extent of these events casts doubt on the feasibility of constructing a 'Tree of Life', because the trees for different genes often tell different stories. However, alternative approaches to tree construction that attempt to determine tree topology on the basis of comparisons of complete gene sets seem to reveal a phylogenetic signal that supports the three-domain evolutionary scenario and suggests the possibility of delineation of previously undetected major clades of prokaryotes. If the validity of these whole-genome approaches to tree building is confirmed by analyses of numerous new genomes, which are currently being sequenced at an increasing rate, it would seem that the concept of a universal 'species' tree is still appropriate. However, this tree should be reinterpreted as a prevailing trend in the evolution of genome-scale gene sets rather than as a complete picture of evolution.