DNA inversions are mutations involving major rearrangements of the genome and are often regarded as either deleterious or catastrophic to gene function and can be associated with genomic disorders, such as Hunter syndrome and some forms of hemophilia. Here, we propose that DNA inversions are also an essential and hitherto unrecognized component of gene evolution in eukaryotic cells. Specifically, we provide evidence that an ancestral neuronal nitric oxide synthase (nNOS) gene was duplicated and that one copy retained its original function, whereas an internal DNA inversion occurred in the other. Crucially, the inversion resulted in the creation of new regulatory elements required for the termination and activation of transcription. In consequence, the duplicated gene was split, and two new and independently expressed genes were created. Through its dependence on DNA inversion, this is a fundamentally new scheme for gene evolution, which we show as being of particular relevance to the generation of endogenous antisense-containing RNA molecules. Functionally, such transcripts can operate as natural negative regulators of the expression of the genes to which they are related through a common ancestor.