Speciation is the process by which a single population can evolve into two or more evolutionarily independent lineages. This dissertation investigates the species relationships and microbe-host dynamics in the Drosophila subquinaria species complex, a group of three mushroom-feeding Drosophila species. In sexually reproducing organisms, species can be defined as independent lineages that do not produce viable and/or fertile offspring. Importantly, barriers that prevent interbreeding can take multiple forms that can include the effect of vertically inherited endosymbionts. Wolbachia is a maternally-inherited endosymbiont that can drastically alter reproduction of its hosts, and is common among arthropods. In this dissertation, I assess species relationships in the D. subquinaria species complex, examine Wolbachia-induced phenotypes in a native and non-native host species, and generate genome assemblies for Drosophila hosts and their Wolbachia infections. First, I utilize a combination of phylogenetic and population genetic methods to analyze a multi-locus dataset covering all genomic regions with deep population sampling of all three D. subquinaria complex species. I find that despite strong levels of reproductive isolation between D. subquinaria and D. recens, there is evidence of gene flow and mitochondrial introgression between these species. A high frequency Wolbachia infection in D. recens and evidence of gene flow suggests that D. subquinaria may be exposed to Wolbachia infection. Second, using lab-estimated measurements of Wolbachia-induced phenotypes in both D. recens and D. subquinaria, I predict that Wolbachia will likely invade D. subquinaria with minimal gene flow from D. recens. Third, I generate de novo genome assemblies for all species of the D. subquinaria species complex and one outgroup species, D. quinaria. I reassess species relationships with broader genomic sampling and find species relationships that are consistent with levels of reproductive isolation among species. Lastly, I generate full genomes for two distinct Wolbachia infections in D. recens, and show that these two strains are recently diverged, yet possess major structural differences. With preliminary population sampling of D. recens populations, I hypothesize that D. recens is currently undergoing a Wolbachia sweep that may facilitate Wolbachia invasion into D. subquinaria.