Acquisition and rearrangement of host genes by transposable elements (TEs) is an important mechanism to increase gene diversity as exemplified by the ∼3000 Pack-Mutator-like TEs in the rice genome which have acquired gene sequences (Pack-MULEs), yet remain enigmatic. To identify signatures of functioning Pack-MULEs and Pack-MULE evolution, we generated transcriptome, translatome, and epigenome datasets and compared Pack-MULEs to genes and other TE families. Approximately 40% of Pack-MULEs were transcribed with 9% having translation evidence, clearly distinguishing them from other TEs. Pack-MULEs exhibited a unique expression profile associated with specificity in reproductive tissues that may be associated with seed traits. Expressed Pack-MULEs resemble regular protein-coding genes as exhibited by a low level of DNA methylation, association with active histone marks and DNase I hypersensitive sites, and an absence of repressive histone marks, suggesting that a substantial fraction of Pack-MULEs are potentially functional in vivo. Interestingly, the expression capacity of Pack-MULEs is independent of the local genomic environment, and the insertion and expression of Pack-MULEs may have altered the local chromosomal expression pattern as well as counteracted the impact of recombination on chromosomal base composition, which has profound consequences on the evolution of chromosome structure.