The recent completion of the sequencing of the Saccharomyces cerevisiae genome provides a unique opportunity to analyze the evolutionary relationships existing among the entire complement of retrotransposons residing within a single genome. In this article we report the results of such an analysis of two closely related families of yeast long terminal repeat (LTR) retrotransposons, Ty1 and Ty2. In our study, we analyzed the molecular variation existing among the 32 Ty1 and 13 Ty2 elements present within the S. cerevisiae genome recently sequenced within the context of the yeast genome project. Our results indicate that while the Ty1 family is most likely ancestral to Ty2 elements, both families of elements are relatively recent components of the S. cerevisiae genome. Our results also indicate that both families of elements have been subject to purifying selection within their protein coding regions. Finally, and perhaps most interestingly, our results indicate that a relatively recent recombination event has occurred between Ty2 and a subclass of Ty1 elements involving the LTR regulatory region. We discuss the possible biological significance of these findings and, in particular, how they contribute to a better overall understanding of LTR retrotransposon evolution.