The 70-kDa heat-shock protein (HSP70) constitutes the most conserved protein present in all organisms that is known to date. Based on global alignment of HSP70 sequences from organisms representing all three domains, numerous sequence signatures that are specific for prokaryotic and eukaryotic homologs have been identified. HSP70s from the two archaebacterial species examined (viz., Halobacterium marismortui and Methanosarcina mazei) have been found to contain all eubacterial but no eukaryotic signature sequences. Based on several novel features of the HSP70 family of proteins (viz., presence of tandem repeats of a 9-amino-acid [a.a.] polypeptide sequence and structural similarity between the first and second quadrants of HSP70, homology of the N-terminal half of HSP70 to the bacterial MreB protein, presence of a conserved insert of 23-27 a.a. in all HSP70s except those from archaebacteria and gram-positive eubacteria) a model for the evolution of HSP70 gene from an early stage is proposed. The HSP70 homologs from archaebacteria and gram-positive bacteria lacking the insert in the N-terminal quadrants are indicated to be the ancestral form of the protein. Detailed phylogenetic analyses of HSP70 sequence data (viz., by bootstrap analyses, maximum parsimony, and maximum likelihood methods) provide evidence that archaebacteria are not monophyletic and show a close evolutionary linkage with the gram-positive eubacteria. These results do not support the traditional archaebacterial tree, where a close relationship between archaebacterial and eukaryotic homologs is observed. To explain the phylogenies based on HSP70 and other gene sequences, a model for the origin of eukaryotic cells involving fusion between archaebacteria and gram-negative eubacteria is proposed.