Lake Malawi cichlid fishes exhibit extensive divergence in form and function built from a relatively small number of genetic changes. We compared the genomes of rock- and sand-dwelling species and asked which genetic variants differed among the groups. We found that 96% of differentiated variants reside in non-coding sequence but these non-coding diverged variants are evolutionarily conserved. Genome regions near differentiated variants are enriched for craniofacial, neural and behavioral categories. Following leads from genome sequence, we used rock- vs. sand- species and their hybrids to (i) delineate the push-pull roles of BMP signaling and irx1b in the specification of forebrain territories during gastrulation and (ii) reveal striking context-dependent brain gene expression during adult social behavior. Our results demonstrate how divergent genome sequences can predict differences in key evolutionary traits. We highlight the promise of evolutionary reverse genetics – the inference of divergence in phenotype from genome sequencing in natural populations.