Since the late 1970s, determining the phylogenetic relationships among the contemporary domains of life, the Archaea (archaebacteria), Bacteria (eubacteria), and Eucarya (eukaryotes), has been central to the study of early cellular evolution. The two salient issues surrounding the universal tree of life are whether all three domains are monophyletic (i.e., all equivalent in taxanomic rank) and where the root of the universal tree lies. Evaluation of the status of the Archaea has become key to answering these questions. This review considers our cumulative knowledge about the Archaea in relationship to the Bacteria and Eucarya. Particular attention is paid to the recent use of molecular phylogenetic approaches to reconstructing the tree of life. In this regard, the phylogenetic analyses of more than 60 proteins are reviewed and presented in the context of their participation in major biochemical pathways. Although many gene trees are incongruent, the majority do suggest a sisterhood between Archaea and Eucarya. Altering this general pattern of gene evolution are two kinds of potential interdomain gene transferrals. One horizontal gene exchange might have involved the gram-positive Bacteria and the Archaea, while the other might have occurred between proteobacteria and eukaryotes and might have been mediated by endosymbiosis.