Mating in basidiomycetous fungi is often controlled by two unlinked, multiallelic loci encoding homeodomain transcription factors or pheromones/pheromone receptors. In contrast to this tetrapolar organization, Cryptococcus neoformans/Cryptococcus gattii have a bipolar mating system, and a single biallelic locus governs sexual reproduction. The C. neoformans MAT locus is unusually large (>100 kb), contains >20 genes, and enhances virulence. Previous comparative genomic studies provided insights into how this unusual MAT locus might have evolved involving gene acquisitions into two unlinked loci and fusion into one contiguous locus, converting an ancestral tetrapolar system to a bipolar one. Here we tested this model by studying Cryptococcus heveanensis, a sister species to the pathogenic Cryptococcus species complex. An extant sexual cycle was discovered; co-incubating fertile isolates results in the teleomorph (Kwoniella heveanensis) with dikaryotic hyphae, clamp connections, septate basidia, and basidiospores. To characterize the C. heveanensis MAT locus, a fosmid library was screened with C. neoformans/C. gattii MAT genes. Positive fosmids were sequenced and assembled to generate two large probably unlinked MAT gene clusters: one corresponding to the homeodomain locus and the other to the pheromone/receptor locus. Strikingly, two divergent homeodomain genes (SXI1, SXI2) are present, similar to the bE/bW Ustilago maydis paradigm, suggesting one or the other homeodomain gene was recently lost in C. neoformans/C. gattii. Sequencing MAT genes from other C. heveanensis isolates revealed a multiallelic homeodomain locus and at least a biallelic pheromone/receptor locus, similar to known tetrapolar species. Taken together, these studies reveal an extant C. heveanensis sexual cycle, define the structure of its MAT locus consistent with tetrapolar mating, and support the proposed evolutionary model for the bipolar Cryptococcus MAT locus revealing transitions in sexuality concomitant with emergence of a pathogenic clade. These studies provide insight into convergent processes that independently punctuated evolution of sex-determining loci and sex chromosomes in fungi, plants, and animals.