Motivation: Phylogenomic approaches towards functional and evolutionary annotation of unknown sequences have been suggested to be superior to those based only on pairwise local alignments. User-friendly software tools making the advantages of phylogenetic annotation available for the ever widening range of bioinformatically uninitiated biologists involved in genome/EST annotation projects are, however, not available. We were particularly confronted with this issue in the annotation of sequences from different groups of complex algae originating from secondary endosymbioses, where the identification of the phylogenetic origin of genes is often more problematic than in taxa well represented in the databases (e.g. animals, plants or fungi). Results: We present a flexible pipeline with a user-friendly, interactive graphical user interface running on desktop computers that automatically performs a basic local alignment search tool (BLAST) search of query sequences, selects a representative subset of them, then creates a multiple alignment from the selected sequences, and finally computes a phylogenetic tree. The pipeline, named PhyloGena, uses public domain software for all standard bioinformatics tasks (similarity search, multiple alignment, and phylogenetic reconstruction). As the major technological innovation, selection of a meaningful subset of BLAST hits was implemented using logic programing, mimicing the selection procedure (BLAST tables, multiple alignments and phylogenetic trees) are displayed graphically, allowing the user to interact with the pipeline and deduce the function and phylogenetic origin of the query. PhyloGena thus makes phylogenomic annotation available also for those biologists without access to large computing facilities and with little informatics background. Although phylogenetic annotation is particularly useful when working with composite genomes (e.g. from complex algae), PhyloGena can be helpful in expressed sequence tag and genome annotation also in other organisms. © The Author 2007. Published by Oxford University Press. All rights reserved.