Abstract Horizontal gene transfer is an important factor in bacterial evolution that can act across species boundaries. Yet, we know little about rate and genomic targets of cross-lineage gene transfer, and about its effects on the recipient organism’s physiology and fitness. Here, we address these questions in a parallel evolution experiment with two Bacillus subtilis lineages of 7% sequence divergence. We observe rapid evolution of hybrid organisms: gene transfer swaps ~12% of the core genome in just 200 generations, and 60% of core genes are replaced in at least one population. By genomics, transcriptomics, fitness assays, and statistical modeling, we show that transfer generates adaptive evolution and functional alterations in hybrids. Specifically, our experiments reveal a strong, repeatable fitness increase of evolved populations in the stationary growth phase. By genomic analysis of the transfer statistics across replicate populations, we infer that selection on HGT has a broad genetic basis: 40% of the observed transfers are adaptive. At the level of functional gene networks, we find signatures of negative and positive selection, consistent with hybrid incompatibilities and adaptive evolution of network functions. Our results suggest that gene transfer navigates a complex cross-lineage fitness landscape, bridging epistatic barriers along multiple high-fitness paths. Significance statement In a parallel evolution experiment, we probe lateral gene transfer between two Bacillus subtilis lineages close to the species boundary. We show that laboratory evolution by horizontal gene transfer can rapidly generate hybrid organisms with broad genomic and functional alterations. By combining genomics, transcriptomics, fitness assays and statistical modeling, we map the selective effects underlying gene transfer. We show that transfer takes place under genome-wide positive and negative selection, generating a net fitness increase in hybrids. The evolutionary dynamics efficiently navigates this fitness landscape, finding viable paths with increasing fraction of transferred genes.