Abstract: The osmotic stress response signalling pathway of the model yeast Saccharomyces cerevisae is crucial for the survival of cells under osmotic stress, and is preserved to varying degrees in other related fungal species. We apply a method for inference of ancestral states of characteristics over a phylogeny to 17 fungal species to infer the maximum likelihood estimate of presence or absence in ancestral genomes of genes involved in osmotic stress response. The same method allows us furthermore to perform a statistical test for correlated evolution between genes. Where such correlations exist within the osmotic stress response pathway of S. cerevisae, we have used this in order to predict and subsequently test for the presence of physical protein-protein interactions in an attempt to detect novel interactions. Finally we assess the relevance of observed evolutionary correlations in predicting protein interactions in light of the experimental results. We do find that correlated evolution provides some useful information for the prediction of protein-protein interactions, but that these alone are not sufficient to explain detectable patterns of correlated evolution.CI - Copyright A(c) 2010 Elsevier Inc. All rights reserved.