In insects, the homologue of the Down syndrome cell adhesion molecule (Dscam) is a unique case of a single-locus gene whose expression has extensive somatic diversification in both the nervous and immune systems. How this situation evolved is best understood through comparative studies. We describe structural, expression, and evolutionary aspects of a Dscam homolog in 2 species of the crustacean Daphnia. The Dscam of Daphnia generates up to 13,000 different transcripts by the alternative splicing of variable exons. This extends the taxonomic range of a highly diversified Dscam beyond the insects. Additionally, we have identified 4 alternative forms of the cytoplasmic tail that generate isoforms with or without inhibitory or activating immunoreceptor tyrosine-based motifs (ITIM and ITAM respectively), something not previously reported in insect's Dscam. In Daphnia, we detected exon usage variability in both the brain and hemocytes (the effector cells of immunity), suggesting that Dscam plays a role in the nervous and immune systems of crustaceans, as it does in insects. Phylogenetic analysis shows a high degree of amino acid conservation between Daphnia and insects except in the alternative exons, which diverge greatly between these taxa. Our analysis shows that the variable exons diverged before the split of the 2 Daphnia species and is in agreement with the nearest-neighbor model for the evolution of the alternative exons. The genealogy of the Dscam gene family from vertebrates and invertebrates confirmed that the highly diversified form of the gene evolved from a nondiversified form before the split of insects and crustaceans.