Background: Parasitism is a major ecological niche for a variety of nematodes. Multiple nematode lineages have specialized as pathogens, including deadly parasites of insects that are used in biological control. We have sequenced and analyzed the draft genomes and transcriptomes of the entomopathogenic nematode Steinernema carpocapsae and four congeners (S. scapterisci, S. monticolum, S. feltiae, and S. glaseri). Results: We used these genomes to establish phylogenetic relationships, explore gene conservation across species, and identify genes uniquely expanded in insect parasites. Protein domain analysis in Steinernema revealed a striking expansion of numerous putative parasitism genes, including certain protease and protease inhibitor families, as well as fatty acid- and retinol-binding proteins. Stage-specific gene expression of some of these expanded families further supports the notion that they are involved in insect parasitism by Steinernema. We show that sets of novel conserved non-coding regulatory motifs are associated with orthologous genes in Steinernema and Caenorhabditis. Conclusions: We have identified a set of expanded gene families that are likely to be involved in parasitism. We have also identified a set of non-coding motifs associated with groups of orthologous genes in Steinernema and Caenorhabditis involved in neurogenesis and embryonic development that are likely part of conserved protein-DNA relationships shared between these two genera.