Two-component systems (TCSs) are common signal transduction systems, typically comprising paired histidine protein kinase (HK) and response regulator (RR) proteins. In many examples, it appears RR and HK genes have fused, producing a 'hybrid kinase ' We have characterized a set of prokaryotic genes encoding RRs, HKs, and hybrid kinases, enabling characterization of gene fusion and fission. Primary factors correlating with fusion rates are the presence of transmembrane helices in HKs and the presence of DNA-binding domains in RRs, features that require correct (and separate) spatial location. In the absence of such features, there is a relative abundance of fused genes. The order of paired HK and RR genes and the nucleotide distance between encoded domains also correlate with apparent gene fusion rates. We propose that localization requirements and relative positioning of encoded domains within TCS genes affect the function (and therefore retention) of hybrid kinases resulting from gene fusion.