Recent advances in metagenomics research have generated a bounty of information that provides insight into the dynamic genetic exchange occurring between bacteriophage (phage) and their bacterial hosts. Metagenomic studies of the microbiomes from a variety of environments have shown that many of the genes sequenced are of phage origin. Among these genes are phage-encoded exotoxin genes. When phage that carry these genes infect an appropriate bacterial host, the bacterium undergoes lysogenic conversion, converting the bacterium from an avirulent strain to a pathogen that can cause human disease. Transfer of the exotoxin genes between bacteria has been shown to occur in marine environments, animal and human intestines and sewage treatment plants. Surprisingly, phage that encode exotoxin genes are commonly found in environments that lack the cognate bacteria commonly associated with the specific toxin-mediated disease and have been found to be associated with alternative environmental bacterial hosts. These findings suggest that the exotoxin genes may play a beneficial role for the bacterial host in nature, and that this environmental reservoir of exotoxin genes may play a role in the evolution of new bacterial pathogens.