The host-specific toxin ToxA produced by the wheat pathogens Pyrenophora tritici-repentis and Phaeosphaeria nodorum interacts with the product of the dominant plant gene Tsn1 to induce necrosis. The ToxA gene is thought to have been acquired by Py. tritici-repentis from Ph. nodorum through a recent horizontal gene transfer event. PCR and sequence analysis indicate that the level of ToxA variation, including gene deletion, in Ph. nodorum (SnToxA) is significantly higher than in Py. tritici-repentis (PtrToxA). We PCR-screened 788 isolates of Ph. nodorum originating from eight geographical regions to infer the pattern of SnToxA deletions. The frequency of deletions differed significantly among populations, ranging from 0% (Australia) to 98% (China). Sequence analysis of the SnToxA gene in 123 Ph. nodorum isolates revealed 13 distinct haplotypes. The distribution and diversity of haplotypes varied significantly among populations. The majority of SnToxA mutations were non-synonymous resulting in changes at the protein level. We applied different models of selection to infer the mode of evolution operating at the ToxA locus. Evidence for positive diversifying selection supports the hypothesis that evolution of the ToxA locus is driven by selection imposed by the host. The distribution of SnToxA alleles and deletions may reflect the distribution of different Tsn1 alleles in the corresponding host populations.