Cactophilic Drosophila species provide a valuable model to study gene-environment interactions and ecological adaptation. Drosophila buzzatii and Drosophila mojavensis are two cactophilic species that belong to the repleta group, but have very different geographical distributions and primary host plants. To investigate the genomic basis of ecological adaptation, we sequenced the genome and developmental transcriptome of D. buzzatii and compared its gene content with that of D. mojavensis and two other noncactophilic Drosophila species in the same subgenus. The newly sequenced D. buzzatii genome (161.5 Mb) comprises 826 scaffolds (>3 kb) and contains 13,657 annotated protein-coding genes. Using RNA sequencing data of five life-stages we found expression of 15,026 genes, 80% protein-coding genes, and 20% noncoding RNA genes. In total, we detected 1,294 genes putatively under positive selection. Interestingly, among genes under positive selection in the D. mojavensis lineage, there is an excess of genes involved in metabolism of heterocyclic compounds that are abundant in Stenocereus cacti and toxic to nonresident Drosophila species. We found 117 orphan genes in the shared D. buzzatii-D. mojavensis lineage. In addition, gene duplication analysis identified lineage-specific expanded families with functional annotations associated with proteolysis, zinc ion binding, chitin binding, sensory perception, ethanol tolerance, immunity, physiology, and reproduction. In summary, we identified genetic signatures of adaptation in the shared D. buzzatii-D. mojavensis lineage, and in the two separate D. buzzatii and D. mojavensis lineages. Many of the novel lineage-specific genomic features are promising candidates for explaining the adaptation of these species to their distinct ecological niches.