The multicellular green alga Volvox carteri and its morphologically diverse close relatives (the volvocine algae) are well suited for the investigation of the evolution of multicellularity and development. We sequenced the 138-mega-base pair genome of V. carteri and compared its approximately 14,500 predicted proteins to those of its unicellular relative Chlamydomonas reinhardtii. Despite fundamental differences in organismal complexity and life history, the two species have similar protein-coding potentials and few species-specific protein-coding gene predictions. Volvox is enriched in volvocine-algal-specific proteins, including those associated with an expanded and highly compartmentalized extracellular matrix. Our analysis shows that increases in organismal complexity can be associated with modifications of lineage-specific proteins rather than large-scale invention of protein-coding capacity.