To reconstruct the evolutionary origin of multicellular animals from their unicellular ancestors, the genome sequences of diverse unicellular relatives are essential. However, only the genome of the choanoflagellate Monosiga brevicollis has been reported to date. Here we completely sequence the genome of the filasterean Capsaspora owczarzaki, the closest known unicellular relative of metazoans besides choanoflagellates. Analyses of this genome alter our understanding of the molecular complexity of metazoans' unicellular ancestors showing that they had a richer repertoire of proteins involved in cell adhesion and transcriptional regulation than previously inferred only with the choanoflagellate genome. Some of these proteins were secondarily lost in choanoflagellates. In contrast, most intercellular signalling systems controlling development evolved later concomitant with the emergence of the first metazoans. We propose that the acquisition of these metazoan-specific developmental systems and the co-option of pre-existing genes drove the evolutionary transition from unicellular protists to metazoans.