Retroposition is widely found to play essential roles in origination of new mammalian and other animal genes. However, the scarcity of retrogenes in plants has led to the assumption that plant genomes rarely evolve new gene duplicates by retroposition, despite abundant retrotransposons in plants and a reported long terminal repeat (LTR) retrotransposon-mediated mechanism of retroposing cellular genes in maize (Zea mays). We show extensive retropositions in the rice (Oryza sativa) genome, with 1235 identified primary retrogenes. We identified 27 of these primary retrogenes within LTR retrotransposons, confirming a previously observed role of retroelements in generating plant retrogenes. Substitution analyses revealed that the vast majority are subject to negative selection, suggesting, along with expression data and evidence of age, that they are likely functional retrogenes. In addition, 42% of these retrosequences have recruited new exons from flanking regions, generating a large number of chimerical genes. We also identified young chimerical genes, suggesting that gene origination through retroposition is ongoing, with a rate an order of magnitude higher than the rate in primates. Finally, we observed that retropositions have followed an unexpected spatial pattern in which functional retrogenes avoid centromeric regions, while retropseudogenes are randomly distributed. These observations suggest that retroposition is an important mechanism that governs gene evolution in rice and other grass species.