Mechanisms of emergence and divergence of protein folds pose central questions in biological sciences. Incremental mutation and stepwise adaptation explain relationships between topologically similar protein folds. However, the universe of folds is diverse and riotous, suggesting more potent and creative forces are at play. Sequence and structure similarity are observed between distinct folds, indicating that proteins with distinct folds may share common ancestry. We found evidence of common ancestry between three distinct β-barrel folds: Scr kinase family homology (SH3), oligonucleotide/oligosaccharide-binding (OB), and cradle loop barrel (CLB). The data suggest a mechanism of fold evolution that interconverts SH3, OB, and CLB. This mechanism, which we call creative destruction, can be generalized to explain many examples of fold evolution including circular permutation. In creative destruction, an open reading frame duplicates or otherwise merges with another to produce a fused polypeptide. A merger forces two ancestral domains into a new sequence and spatial context. The fused polypeptide can explore folding landscapes that are inaccessible to either of the independent ancestral domains. However, the folding landscapes of the fused polypeptide are not fully independent of those of the ancestral domains. Creative destruction is thus partially conservative; a daughter fold inherits some motifs from ancestral folds. After merger and refolding, adaptive processes such as mutation and loss of extraneous segments optimize the new daughter fold. This model has application in disease states characterized by genetic instability. Fused proteins observed in cancer cells are likely to experience remodeled folding landscapes and realize altered folds, conferring new or altered functions.