Genes that confer defense against pathogens often are clustered in the genome and evolve via diverse mechanisms. To evaluate the organization and content of a major defense gene complex in cereals, we determined the complete sequence of a 261-kb BAC contig from barley cv Morex that spans the Mla (powdery mildew) resistance locus. Among the 32 predicted genes on this contig, 15 are associated with plant defense responses; 6 of these are associated with defense responses to powdery mildew disease but function in different signaling pathways. The Mla region is organized as three gene-rich islands separated by two nested complexes of transposable elements and a 45-kb gene-poor region. A heterochromatic-like region is positioned directly proximal to Mla and is composed of a gene-poor core with 17 families of diverse tandem repeats that overlap a hypermethylated, but transcriptionally active, gene-dense island. Paleontology analysis of long terminal repeat retrotransposons indicates that the present Mla region evolved over a period of >7 million years through a variety of duplication, inversion, and transposon-insertion events. Sequence-based recombination estimates indicate that R genes positioned adjacent to nested long terminal repeat retrotransposons, such as Mla, do not favor recombination as a means of diversification. We present a model for the evolution of the Mla region that encompasses several emerging features of large cereal genomes.