Recently, increasingly more microsatellites, or simple sequence repeats (SSRs) have been found and characterized within protein-coding genes and their untranslated regions (UTRs). These data provide useful information to study possible SSR functions. Here, we review SSR distributions within expressed sequence tags (ESTs) and genes including protein-coding, 3'-UTRs and 5'-UTRs, and introns; and discuss the consequences of SSR repeat-number changes in those regions of both prokaryotes and eukaryotes. Strong evidence shows that SSRs are nonrandomly distributed across protein-coding regions, UTRs, and introns. Substantial data indicates that SSR expansions and/or contractions in protein-coding regions can lead to a gain or loss of gene function via frameshift mutation or expanded toxic mRNA. SSR variations in 5'-UTRs could regulate gene expression by affecting transcription and translation. The SSR expansions in the 3'-UTRs cause transcription slippage and produce expanded mRNA, which can be accumulated as nuclear foci, and which can disrupt splicing and, possibly, disrupt other cellular function. Intronic SSRs can affect gene transcription, mRNA splicing, or export to cytoplasm. Triplet SSRs located in the UTRs or intron can also induce heterochromatin-mediated-like gene silencing. All these effects caused by SSR expansions or contractions within genes can eventually lead to phenotypic changes. SSRs within genes evolve through mutational processes similar to those for SSRs located in other genomic regions including replication slippage, point mutation, and recombination. These mutational processes generate DNA changes that should be connected by DNA mismatch repair (MMR) system. Mutation that has escaped from the MMR system correction would become new alleles at the SSR loci, and then regulate and/or change gene products, and eventually lead to phenotype changes. Therefore, SSRs within genes should be subjected to stronger selective pressure than other genomic regions because of their functional importance. These SSRs may provide a molecular basis for fast adaptation to environmental changes in both prokaryotes and eukaryotes.