Phosphonate utilization by microbes provides a potential source of phosphorus for their growth. Homologous genes for both C-P lyase and phosphonatase degradative pathways are distributed in distantly related bacterial species. The phn gene clusters for the C-P lyase pathway show great structural and compositional variation among organisms, but all contain phnG-phnM genes that are essential for C-P bond cleavage. In the gamma-proteobacterium Erwinia carotovora, genes common to phosphonate biosyntheses were found in neighboring positions of those for the C-P lyase degradative pathway and in the same transcriptional direction. A gene encoding a hypothetical protein DUF1045 was found predominantly associated with the phn gene cluster and was predicted functionally related to C-P bond cleavage. Genes for phosphonate degradation are frequently located in close proximity of genes encoding transposases or other mobile elements. Phylogenetic analyses suggest that both degradative pathways have been subject to extensive lateral gene transfers during their evolution. The implications of plasmids and transposition in the evolution of phosphonate degradation are also discussed.