Host-adapted bacteria include mutualists and pathogens of animals, plants and insects. Their study is therefore important for biotechnology, biodiversity and human health. The recent rapid expansion in bacterial genome data has provided insights into the adaptive, diversifying and reductive evolutionary processes that occur during host adaptation. The results have challenged many pre-existing concepts built from studies of laboratory bacterial strains. Furthermore, recent studies have revealed genetic changes associated with transitions from parasitism to mutualism and opened new research avenues to understand the functional reshaping of bacteria as they adapt to growth in the cytoplasm of a eukaryotic host.