Eukaryotes and prokaryotes have distinct genome architectures, with marked differences in genome size, the ratio of coding/non-coding DNA, and the abundance of transposable elements (TEs). As TEs replicate independently of their hosts, the proliferation of TEs is thought to have driven genome expansion in eukaryotes. However, prokaryotes also have TEs in intergenic spaces, so why do prokaryotes have small, streamlined genomes? Using an in silico model describing the genomes of single-celled asexual organisms that coevolve with TEs, we show that TEs acquired from the environment by horizontal gene transfer can promote the evolution of genome streamlining. The process depends on local interactions and is underpinned by rock-paper-scissors dynamics in which populations of cells with streamlined genomes beat TEs, which beat non-streamlined genomes, which beat streamlined genomes, in continuous and repeating cycles. Streamlining is maladaptive to individual cells, but improves lineage viability by hindering the proliferation of TEs. Streamlining does not evolve in sexually reproducing populations because recombination partially frees TEs from the deleterious effects they cause. This article is part of the theme issue 'The secret lives of microbial mobile genetic elements'.
Keywords: altruism; horizontal gene transfer; lineage selection; non-transitive interactions; sex; spatial structure.