Siamese fighting (betta) fish are among the most popular and morphologically diverse pet fish, but the genetic bases of their domestication and phenotypic diversification are largely unknown. We assembled de novo the genome of a wild Betta splendens and whole-genome sequenced 98 individuals across five closely related species. We find evidence of bidirectional hybridization between domesticated ornamental betta and other wild Betta species. We discover dmrt1 as the main sex determination gene in ornamental betta and that it has lower penetrance in wild B. splendens. Furthermore, we find genes with signatures of recent, strong selection that have large effects on color in specific parts of the body or on the shape of individual fins and that most are unlinked. Our results demonstrate how simple genetic architectures paired with anatomical modularity can lead to vast phenotypic diversity generated during animal domestication and launch betta as a powerful new system for evolutionary genetics.