The nucleotide and deduced amino acid sequence of the envelope (E) gene of Tyuleniy (TYU) and Saumarez Reef (SRE) virus have been determined and the data used to classify these viruses in relation to the other tick- and mosquito-borne viruses in the genus Flavivirus. The phylogenetic trees obtained by maximum parsimony and distance methods for 22 flavivirus E genes showed that TYU and SRE virus are a sister group of the TBE virus complex. The trees were consistent with the Flavivirus serological classification and are compatible with the proposition that Cell Fusing Agent could be another genus in the family Flaviviridae. Comparison of the phylogeny and mutational regime of the E gene with the RNA-dependent RNA polymerase (NS5) gene shows the validity of the E gene as a phylogenetic marker and suggests that the mosquito-borne flaviviruses are evolving twice as fast as the tick-borne flaviviruses. The implications of these observations are discussed.