BACKGROUND: A new paradigm of biological investigation takes advantage of technologies that produce large high throughput datasets, including genome sequences, interactions of proteins, and gene expression. The ability of biologists to analyze and interpret such data relies on functional annotation of the included proteins, but even in highly characterized organisms many proteins can lack the functional evidence necessary to infer their biological relevance. RESULTS: Here we have applied high confidence function predictions from our automated prediction system, PFP, to three genome sequences, Escherichia coli, Saccharomyces cerevisiae, and Plasmodium falciparum (malaria). The number of annotated genes is increased by PFP to over 90% for all of the genomes. Using the large coverage of the function annotation, we introduced the functional similarity networks which represent the functional space of the proteomes. Four different functional similarity networks are constructed for each proteome, one each by considering similarity in a single Gene Ontology (GO) category, i.e. Biological Process, Cellular Component, and Molecular Function, and another one by considering overall similarity with the funSim score. The functional similarity networks are shown to have higher modularity than the protein-protein interaction network. Moreover, the funSim score network is distinct from the single GO-score networks by showing a higher clustering degree exponent value and thus has a higher tendency to be hierarchical. In addition, examining function assignments to the protein-protein interaction network and local regions of genomes has identified numerous cases where subnetworks or local regions have functionally coherent proteins. These results will help interpreting interactions of proteins and gene orders in a genome. Several examples of both analyses are highlighted. CONCLUSION: The analyses demonstrate that applying high confidence predictions from PFP can have a significant impact on a researchers' ability to interpret the immense biological data that are being generated today. The newly introduced functional similarity networks of the three organisms show different network properties as compared with the protein-protein interaction networks.

MOTIVATION: Importance of accurate automatic protein function prediction is ever increasing in the face of a large number of newly sequenced genomes and proteomics data that are awaiting biological interpretation. Conventional methods have focused on high sequence similarity-based annotation transfer which relies on the concept of homology. However, many cases have been reported that simple transfer of function from top hits of a homology search causes erroneous annotation. New methods are required to handle the sequence similarity in a more robust way to combine together signals from strongly and weakly similar proteins for effectively predicting function for unknown proteins with high reliability. RESULTS: We present the extended similarity group (ESG) method, which performs iterative sequence database searches and annotates a query sequence with Gene Ontology terms. Each annotation is assigned with probability based on its relative similarity score with the multiple-level neighbors in the protein similarity graph. We will depict how the statistical framework of ESG improves the prediction accuracy by iteratively taking into account the neighborhood of query protein in the sequence similarity space. ESG outperforms conventional PSI-BLAST and the protein function prediction (PFP) algorithm. It is found that the iterative search is effective in capturing multiple-domains in a query protein, enabling accurately predicting several functions which originate from different domains. AVAILABILITY: ESG web server is available for automated protein function prediction at http://dragon.bio.purdue.edu/ESG/.