Xenorhabdus and Photorhabdus are two genera of gram-negative gamma proteobacteria that form entomopathogenic symbioses with soil nematodes in the genera Steinemema and Heterorhabditis, respectively. They undergo a complex life cycle that involves (i) a symbiotic stage in which the bacteria are carried in the gut tracts of the nematodes, and (ii) a pathogenic stage, in which susceptible insect prey ave killed by the combined action of the nematode and the bacteria. A variety, of unusual traits are found in both bacterial groups, including pigmentation, antibiotic production, intracellular protein crystal formation, and large cell size, and many of these trails change in phase variants which arise when the bacteria are maintained in laboratory culture. Molecular genetic studies of bioluminescence, lipase, and outer membrane protein expression suggest that Xenorhabdus and Photorhabdus species may serve as valuable model systems to study signal transduction and transcriptional and posttranscriptional regulation of gene expression. From such studies, it is also apparent that these bacterial groups (and their life cycles), which have always been considered to be very similar may actually be quite different at the molecular level. The phenotypic similarities thus mask genetic dissimilarities, which seem to suggest that these systems may have phenotypically converged via horizontal gene transfer from distinctly different gene pools.