The first genome sequence assemblies of farm animal species are now accessible through public domain databases, and further sequencing projects are in rapid progress. In addition, large collections of expressed sequences have been obtained, which will aid in constructing annotated transcript maps for many economically important species. Thus, the breeding of farm animals is entering the post-genome era. Functional genomics, defined as applying global experimental approaches to assess gene function, by using the information and reagents provided by structural genomics (i.e. mapping and sequencing), has become the focus of interest. Combining a holistic view of phenotypes at the molecular level with genetic marker data seems a particularly promising approach for improving health and welfare traits in farm animals. These traits are often difficult to define. They suffer from low heritabilities and a corresponding lack of genetic gain in conventional selection and breeding programmes. At the same time, genomic information from micro-organisms and parasites offers the potential for new vaccines and therapeutics. This review describes major functional genomics tools, lists genomic resources available for farm animals and discusses the prospects and challenges of functional genomics in improving the health and welfare of farm animals.