Microbial genes that are "novel" (no detectable homologs in other species) have become of increasing interest as environmental sampling suggests that there are many more such novel genes in yet-to-be-cultured microorganisms. By analyzing known microbial genomic islands and prophages, we developed criteria for systematic identification of putative genomic islands (clusters of genes of probable horizontal origin in a prokaryotic genome) in 63 prokaryotic genomes, and then characterized the distribution of novel genes and other features. All but a few of the genomes examined contained significantly higher proportions of novel genes in their predicted genomic islands compared with the rest of their genome (Paired t test = 4.43E-14 to 1.27E-18, depending on method). Moreover, the reverse observation (i.e., higher proportions of novel genes outside of islands) never reached statistical significance in any organism examined. We show that this higher proportion of novel genes in predicted genomic islands is not due to less accurate gene prediction in genomic island regions, but likely reflects a genuine increase in novel genes in these regions for both bacteria and archaea. This represents the first comprehensive analysis of novel genes in prokaryotic genomic islands and provides clues regarding the origin of novel genes. Our collective results imply that there are different gene pools associated with recently horizontally transmitted genomic regions versus regions that are primarily vertically inherited. Moreover, there are more novel genes within the gene pool associated with genomic islands. Since genomic islands are frequently associated with a particular microbial adaptation, such as antibiotic resistance, pathogen virulence, or metal resistance, this suggests that microbes may have access to a larger "arsenal" of novel genes for adaptation than previously thought.