YY2 was originally identified due to its unusual similarity to the evolutionarily well-conserved zinc finger gene YY1. In this study, we have determined the evolutionary origin and conservation of YY2 using comparative genomic approaches. Our results indicate that YY2 is a retroposed copy of YY1 that has been inserted into another gene locus named Mbtps2 (membrane-bound transcription factor protease site 2). This retroposition is estimated to have occurred after the divergence of placental mammals from other vertebrates based on the detection of YY2 only in the placental mammals. The N- and C-terminal regions of YY2 have evolved under different selection pressures. The N-terminal region has evolved at a very fast pace with very limited functional constraints, whereas the DNA-binding, C-terminal region still maintains a sequence structure very similar to that of YY1 and is also well conserved among placental mammals. In situ hybridizations using different adult mouse tissues indicate that mouse YY2 is expressed at relatively low levels in Purkinje and granular cells of cerebellum and in neuronal cells of cerebrum, but at very high levels in testis. The expression levels of YY2 are much lower than those of YY1, but the overall spatial expression patterns are similar to those of Mbtps2, suggesting a possible shared transcriptional control between YY2 and Mbtps2. Taken together, the formation and evolution of YY2 represent a very unusual case where a transcription factor was first retroposed into another gene locus encoding a protease and survived with different selection schemes and expression patterns.