The compact genome of the pufferfish, Fugu rubripes, has been proposed as a 'reference' genome to aid in annotating and analysing the human genome. We have annotated and compared 85 kb of Fugu sequence containing 17 genes with its homologous loci in the human draft genome and identified three 'novel' human genes that were missed or incompletely predicted by the previous gene prediction methods. Two of the novel genes contain zinc finger domains and are designated ZNF366 and ZNF367. They map to human chromosomes 5q13.2 and 9q22.32, respectively. The third novel gene, designated C9orf21, maps to chromosome 9q22.32. This gene is unique to vertebrates, and the protein encoded by it does not contain any known domains. We could not find human homologs for two Fugu genes, a novel chemokine gene and a kinase gene. These genes are either specific to teleosts or lost in the human lineage. The Fugu-human comparison identified several conserved non-coding sequences in the promoter and intronic regions. These sequences, conserved during 450 million years of vertebrate evolution, are likely to be involved in gene regulation. The 85 kb Fugu locus is dispersed over four human loci, occupying about 1.5 Mb. Contiguity is conserved in the human genome between six out of 16 Fugu gene pairs. These contiguous chromosomal segments should share a common evolutionary history dating back to the common ancestor of mammals and teleosts. We propose contiguity as strong evidence to identify orthologous genes in distant organisms. This study confirms the utility of the Fugu as a supplementary tool to uncover and confirm novel genes and putative gene regulatory regions in the human genome.