The molecular evolution of the leukotoxin structural gene (lktA) of Mannheimia (Pasteurella) haemolytica was investigated by nucleotide sequence comparison of lktA in 31 bovine and ovine strains representing the various evolutionary lineages and serotypes of the species. Eight major allelic variants (1.4 to 15.7% nucleotide divergence) were identified; these have mosaic structures of varying degrees of complexity reflecting a history of horizontal gene transfer and extensive intragenic recombination. The presence of identical alleles in strains of different genetic backgrounds suggests that assortative (entire gene) recombination has also contributed to strain diversification in M. haemolytica. Five allelic variants occur only in ovine strains and consist of recombinant segments derived from as many as four different sources. Four of these alleles consist of DNA (52.8 to 96.7%) derived from the lktA gene of the two related species Mannheimia glucosida and Pasteurella trehalosi, and four contain recombinant segments derived from an allele that is associated exclusively with bovine or bovine-like serotype A2 strains. The two major lineages of ovine serotype A2 strains possess lktA alleles that have very different evolutionary histories and encode divergent leukotoxins (5.3% amino acid divergence), but both contain segments derived from the bovine allele. Homologous segments of donor and recipient alleles are identical or nearly identical, indicating that the recombination events are relatively recent and probably postdate the domestication of cattle and sheep. Our findings suggest that host switching of bovine strains from cattle to sheep, together with inter- and intraspecies recombinational exchanges, has played an important role in generating leukotoxin diversity in ovine strains. In contrast, there is limited allelic diversity of lktA in bovine strains, suggesting that transmission of strains from sheep to cattle has been less important in leukotoxin evolution.