The red seaweed Porphyra (Bangiophyceae) and related Bangiales have global economic importance. Here, we report the analysis of a comprehensive transcriptome comprising ca. 4.7 million expressed sequence tag (EST) reads from P. umbilicalis (L.) J. Agardh and P. purpurea (Roth) C. Agardh (ca. 980 Mbp of data generated using 454 FLX pyrosequencing). These ESTs were isolated from the haploid gametophyte (blades from both species) and diploid conchocelis stage (from P. purpurea). In a bioinformatic analysis, only 20% of the contigs were found to encode proteins of known biological function. Comparative analysis of predicted protein functions in mesophilic (including Porphyra) and extremophilic red algae suggest that the former has more putative functions related to signaling, membrane transport processes, and establishment of protein complexes. These enhanced functions may reflect general mesophilic adaptations. A near-complete repertoire of genes encoding histones and ribosomal proteins was identified, with some differentially regulated between the blade and conchocelis stage in P. purpurea. This finding may reflect specific regulatory processes associated with these distinct phases of the life history. Fatty acid desaturation patterns, in combination with gene expression profiles, demonstrate differences from seed plants with respect to the transport of fatty acid/lipid among subcellular compartments and the molecular machinery of lipid assembly. We also recovered a near-complete gene repertoire for enzymes involved in the formation of sterols and carotenoids, including candidate genes for the biosynthesis of lutein. Our findings provide key insights into the evolution, development, and biology of Porphyra, an important lineage of red algae.