Our proposal will tackle a central issue in biology: what is the genetic basis of species differentiation? Recent evidence of genetic exchange among species has led many to reject the traditional view that speciation requires complete reproductive isolation. Instead, the emerging new concept of so-called ‘genic speciation’ asserts that reproductive barriers can be established by divergence at only a few loci against a background of gene flow. We will combine novel and powerful analytical methods with new and traditional genetic technologies to investigate the genetic basis of species differences, and the process of divergence, in a model system of two co-distributed species of horseshoe bat (R. yunanensis and R. p. pearsoni). The Incoming Fellow has previously shown that, in these taxa, there is strong evidence of extensive past replacement of the nuclear genome in spite of clear phenotypic, acoustic and karyotypic differences. This unusual system provides an exceptional opportunity to identify and characterize genes that encode phenotypic differences among taxa, and also to determine the functional characteristics of ‘leaky genes’ versus ‘non-leaky genes’ (or ‘species genes’). Such knowledge of a natural mammalian system at a genome scale would take us beyond the current state-of-the art of research in this field, and would have impact in frontier science as well as potential benefits to conservation, genetics and evolutionary biologists. We will use Next Generation Sequencing and a highly novel statistical pipeline to identify key loci and larger ‘genomic islands’ that have resisted introgressive hybridization between our focal taxa. Our phylogenomic approach will then be extended to a larger sample to study whether these loci are under selection. Finally, we will apply chromosomal genetics methods to establish whether non-leaky loci and islands are influenced by the presence of chromosomal rearrangements, such as inversions.