Recently, the human C(alpha)-formylglycine (FGly)-generating enzyme (FGE), whose deficiency causes the autosomal-recessively transmitted lysosomal storage disease multiple sulfatase deficiency (MSD), has been identified. In sulfatases, FGE posttranslationally converts a cysteine residue to FGly, which is part of the catalytic site and is essential for sulfatase activity. FGE is encoded by the sulfatase modifying factor 1 (SUMF1) gene, which defines a new gene family comprising orthologs from prokaryotes to higher eukaryotes. The genomes of E. coli, S. cerevisiae and C. elegans lack SUMF1, indicating a phylogenetic gap and the existence of an alternative FGly-generating system. The genomes of vertebrates including mouse, man and pufferfish contain a sulfatase modifying factor 2 (SUMF2) gene encoding an FGE paralog of unknown function. SUMF2 evolved from a single exon SUMF1 gene as found in diptera prior to divergent intron acquisition. In several prokaryotic genomes, the SUMF1 gene is cotranscribed with genes encoding sulfatases which require FGly modification. The FGE protein contains a single domain that is made up of three highly conserved subdomains spaced by nonconserved sequences of variable lengths. The similarity among the eukaryotic FGE orthologs varies between 72% and 100% for the three subdomains and is highest for the C-terminal subdomain, which is a hotspot for mutations in MSD patients.