The high temperature, acidity, and heavy metal-rich environments associated with hot springs have a major impact on biological processes in resident cells. One group of photosynthetic eukaryotes, the Cyanidiophyceae (Rhodophyta), has successfully thrived in hot springs and associated sites worldwide for more than 1 billion years. Here, we analyze chromosome-level assemblies from three representative Cyanidiophyceae species to study environmental adaptation at the genomic level. We find that subtelomeric gene duplication of functional genes and loss of canonical eukaryotic traits played a major role in environmental adaptation, in addition to horizontal gene transfer events. Shared responses to environmental stress exist in Cyanidiales and Galdieriales, however, most of the adaptive genes (e.g., for arsenic detoxification) evolved independently in these lineages. Our results underline the power of local selection to shape eukaryotic genomes that may face vastly different stresses in adjacent, extreme microhabitats.