Suppressed recombination allows divergence between homologous sex chromosomes and the functionality of their genes. Here, we reveal patterns of the earliest stages of sex-chromosome evolution in the diploid dioecious herb Mercurialis annua on the basis of cytological analysis, de novo genome assembly and annotation, genetic mapping, exome resequencing of natural populations, and transcriptome analysis. The genome assembly contained 34,105 expressed genes, of which 10,076 were assigned to linkage groups. Genetic mapping and exome resequencing of individuals across the species range both identified the largest linkage group, LG1, as the sex chromosome. Although the sex chromosomes of M. annua are karyotypically homomorphic, we estimate that about one-third of the Y chromosome, containing 568 transcripts and spanning 22.3 cM in the corresponding female map, has ceased recombining. Nevertheless, we found limited evidence for Y-chromosome degeneration in terms of gene loss and pseudogenization, and most X- and Y-linked genes appear to have diverged in the period subsequent to speciation between M. annua and its sister species M. huetii, which shares the same sex-determining region. Taken together, our results suggest that the M. annua Y chromosome has at least two evolutionary strata: a small old stratum shared with M. huetii, and a more recent larger stratum that is probably unique to M. annua and that stopped recombining ∼1 MYA. Patterns of gene expression within the nonrecombining region are consistent with the idea that sexually antagonistic selection may have played a role in favoring suppressed recombination.