The transition to a terrestrial environment, termed terrestrialization, is generally regarded as a pivotal event in the evolution and diversification of the land plant flora that changed the surface of our planet. Through phylogenomic studies, a group of streptophyte algae, the Zygnematophyceae, have recently been recognized as the likely sister group to land plants (embryophytes). Here, we report genome sequences and analyses of two early diverging Zygnematophyceae (Spirogloea muscicola gen. nov. and Mesotaenium endlicherianum) that share the same subaerial/terrestrial habitat with the earliest-diverging embryophytes, the bryophytes. We provide evidence that genes (i.e., GRAS and PYR/PYL/RCAR) that increase resistance to biotic and abiotic stresses in land plants, in particular desiccation, originated or expanded in the common ancestor of Zygnematophyceae and embryophytes, and were gained by horizontal gene transfer (HGT) from soil bacteria. These two Zygnematophyceae genomes represent a cornerstone for future studies to understand the underlying molecular mechanism and process of plant terrestrialization. Display omitted •Genomes of two subaerial Zygnematophyceae highlight terrestrial adaptation•A novel lineage is described that is closest to the origin of embryophytes•Genes acquired by HGT from soil bacteria regulate plant development and stress•A recent whole genome triplication is reported for Spirogloea muscicola The genomes of two streptophyte algal species, including a newly identified lineage placed closest to the branch point separating green algae and land plants, are reported and provide evidence that genes thought to be important for resistance to desiccation were gained by horizontal gene transfer from soil bacteria approximately 580 million years ago.