The development of efficient DNA sequencing methods has led to the achievement of the DNA sequence of entire genomes from (to date) 55 prokaryotes, 5 eukaryotic organisms and 10 eukaryotic chromosomes. Thus, an enormous amount of DNA sequence data is available and even more will be forthcoming in the near future. Analysis of this overwhelming amount of data requires bioinformatic tools in order to identify genes that encode functional proteins or RNA. This is an important task, considering that even in the well-studied Escherichia coli more than 30% of the identified open reading frames are hypothetical genes. Future challenges of genome sequence analysis will include the understanding of gene regulation and metabolic pathway reconstruction including DNA chip technology, which holds tremendous potential for biomedicine and the biotechnological production of valuable compounds. The overwhelming volume of information often confuses scientists. This review intends to provide a guide to choosing the most efficient way to analyze a new sequence or to collect information on a gene or protein of interest by applying current publicly available databases and Web services. Recently developed tools that allow functional assignment of genes, mainly based on sequence similarity of the deduced amino acid sequence, using the currently available and increasing biological databases will be discussed.