Background One of the most unusual sources of phylogenetically restricted genes is the molecular domestication of transposable elements into a host genome as functional genes. Although these kinds of events are sometimes at the core of key macroevolutionary changes, their origin and organismal function are generally poorly understood. Results Here, we identify several previously unreported transposable element domestication events in the human and mouse genomes. Among them, we find a remarkable molecular domestication that gave rise to a multigenic family in placental mammals, the Bex/Tceal gene cluster. These genes, which act as hub proteins within diverse signaling pathways, have been associated with neurological features of human patients carrying genomic microdeletions in chromosome X. The Bex/Tceal genes display neural-enriched patterns and are differentially expressed in human neurological disorders, such as autism and schizophrenia. Two different murine alleles of the cluster member Bex3 display morphological and physiopathological brain modifications, such as reduced interneuron number and hippocampal electrophysiological imbalance, alterations that translate into distinct behavioral phenotypes. Conclusions We provide an in-depth understanding of the emergence of a gene cluster that originated by transposon domestication and gene duplication at the origin of placental mammals, an evolutionary process that transformed a non-functional transposon sequence into novel components of the eutherian genome. These genes were integrated into existing signaling pathways involved in the development, maintenance, and function of the CNS in eutherians. At least one of its members, Bex3, is relevant for higher brain functions in placental mammals and may be involved in human neurological disorders.