Abstract Background Dinoflagellates in the family Symbiodiniaceae are important photosynthetic symbionts in cnidarians (such as corals) and other coral reef organisms. Breakdown of the coral-dinoflagellate symbiosis due to environmental stress (i.e. coral bleaching) can lead to coral death and the potential collapse of reef ecosystems. However, evolution of Symbiodiniaceae genomes, and its implications for the coral, is little understood. Genome sequences of Symbiodiniaceae remain scarce due in part to their large genome sizes (1–5 Gbp) and idiosyncratic genome features. Results Here, we present de novo genome assemblies of seven members of the genus Symbiodinium, of which two are free-living, one is an opportunistic symbiont, and the remainder are mutualistic symbionts. Integrating other available data, we compare 15 dinoflagellate genomes revealing high sequence and structural divergence. Divergence among some Symbiodinium isolates is comparable to that among distinct genera of Symbiodiniaceae. We also recovered hundreds of gene families specific to each lineage, many of which encode unknown functions. An in-depth comparison between the genomes of the symbiotic Symbiodinium tridacnidorum (isolated from a coral) and the free-living Symbiodinium natans reveals a greater prevalence of transposable elements, genetic duplication, structural rearrangements, and pseudogenisation in the symbiotic species. Conclusions Our results underscore the potential impact of lifestyle on lineage-specific gene-function innovation, genome divergence, and the diversification of Symbiodinium and Symbiodiniaceae. The divergent features we report, and their putative causes, may also apply to other microbial eukaryotes that have undergone symbiotic phases in their evolutionary history.