Fossil records indicate that life appeared in marine environments ∼3.5 billion years ago (Gyr) and transitioned to terrestrial ecosystems nearly 2.5 Gyr. Sequence analysis suggests that “hydrobacteria” and “terrabacteria” might have diverged as early as 3 Gyr. Bacteria of the genus Azospirillum are associated with roots of terrestrial plants; however, virtually all their close relatives are aquatic. We obtained genome sequences of two Azospirillum species and analyzed their gene origins. While most Azospirillum house-keeping genes have orthologs in its close aquatic relatives, this lineage has obtained nearly half of its genome from terrestrial organisms. The majority of genes encoding functions critical for association with plants are among horizontally transferred genes. Our results show that transition of some aquatic bacteria to terrestrial habitats occurred much later than the suggested initial divergence of hydro- and terrabacterial clades. The birth of the genus Azospirillum approximately coincided with the emergence of vascular plants on land.