Although common among bacteria, lateral gene transfer - the movement of genes between distantly related organisms - is thought to occur only rarely between bacteria and multicellular eukaryotes. However, the presence of endosymbionts, such as Wolbachia pipientis, within some eukaryotic germlines may facilitate bacterial gene transfers to eukaryotic host genomes. We therefore examined host genomes for evidence of gene transfer events from Wolbachia bacteria to their hosts. We found and confirmed transfers into the genomes of four insect and four nematode species that range from nearly the entire Wolbachia genome (<1 megabase) to short (>500 base pairs) insertions. Potential Wolbachia-to-host transfers were also detected computationally in three additional sequenced insect genomes. We also show that some of these inserted Wolbachia genes are transcribed within eukaryotic cells lacking endosymbionts. Therefore, heritable lateral gene transfer occurs into eukaryotic hosts from their prokaryote symbionts, potentially providing a mechanism for acquisition of new genes and functions.