ABSTRACT Staphylococcus aureus is an opportunistic pathogen and the major causative agent of numerous hospital- and community-acquired infections. Staphylococcus epidermidis has emerged as a causative agent of infections often associated with implanted medical devices. We have sequenced the ∼2.8-Mb genome of S. aureus COL, an early methicillin-resistant isolate, and the ∼2.6-Mb genome of S. epidermidis RP62a, a methicillin-resistant biofilm isolate. Comparative analysis of these and other staphylococcal genomes was used to explore the evolution of virulence and resistance between these two species. The S. aureus and S. epidermidis genomes are syntenic throughout their lengths and share a core set of 1,681 open reading frames. Genome islands in nonsyntenic regions are the primary source of variations in pathogenicity and resistance. Gene transfer between staphylococci and low-GC-content gram-positive bacteria appears to have shaped their virulence and resistance profiles. Integrated plasmids in S. epidermidis carry genes encoding resistance to cadmium and species-specific LPXTG surface proteins. A novel genome island encodes multiple phenol-soluble modulins, a potential S. epidermidis virulence factor. S. epidermidis contains the cap operon, encoding the polyglutamate capsule, a major virulence factor in Bacillus anthracis . Additional phenotypic differences are likely the result of single nucleotide polymorphisms, which are most numerous in cell envelope proteins. Overall differences in pathogenicity can be attributed to genome islands in S. aureus which encode enterotoxins, exotoxins, leukocidins, and leukotoxins not found in S. epidermidis .