Malassezia is a unique lipophilic genus in class Malasseziomycetes in Ustilaginomycotina, (Basidiomycota, fungi) that otherwise consists almost exclusively of plant pathogens. Malassezia are typically isolated from warm-blooded animals, are dominant members of the human skin mycobiome and are associated with common skin disorders. To characterize the genetic basis of the unique phenotypes of Malassezia spp., we sequenced the genomes of all 14 accepted species and used comparative genomics against a broad panel of fungal genomes to comprehensively identify distinct features that define the Malassezia gene repertoire: gene gain and loss; selection signatures; and lineage-specific gene family expansions. Our analysis revealed key gene gain events (64) with a single gene conserved across all Malassezia but absent in all other sequenced Basidiomycota. These likely horizontally transferred genes provide intriguing gain-of-function events and prime candidates to explain the emergence of Malassezia. A larger set of genes (741) were lost, with enrichment for glycosyl hydrolases and carbohydrate metabolism, concordant with adaptation to skin's carbohydrate-deficient environment. Gene family analysis revealed extensive turnover and underlined the importance of secretory lipases, phospholipases, aspartyl proteases, and other peptidases. Combining genomic analysis with a re-evaluation of culture characteristics, we establish the likely lipid-dependence of all Malassezia. Our phylogenetic analysis sheds new light on the relationship between Malassezia and other members of Ustilaginomycotina, as well as phylogenetic lineages within the genus. Overall, our study provides a unique genomic resource for understanding Malassezia niche-specificity and potential virulence, as well as their abundance and distribution in the environment and on human skin.