Cross-species chromosome painting was used to investigate genome rearrangements between tammar wallaby Macropus eugenii (2n = 16) and the swamp wallaby Wallabia bicolor (2n = 10female symbol/11male symbol), which diverged about 6 million years ago. The swamp wallaby has an XX female:XY1Y2 male sex chromosome system thought to have resulted from a fusion between an autosome and the small original X, not involving the Y. Thus, the small Y1 should represent the original Y and the large Y2 the original autosome. DNA paints were prepared from flow-sorted and microdissected chromosomes from the tammar wallaby. Painting swamp wallaby spreads with each tammar chromosome-specific probe gave extremely strong and clear signals in single-, two-, and three-color FISH. These showed that two tammar wallaby autosomes are represented unchanged in the swamp wallaby, two are represented by different centric fusions, and one by a tandem fusion to make the very long arms of swamp wallaby Chromosome (Chr) 1. The large swamp wallaby X comprises the tammar X as its short arm, and a tandemly fused 7 and 2 as the long arm. The acrocentric swamp wallaby Y2 is a 2/7 fusion, homologous with the long arm of the X. The small swamp wallaby Y1 is confirmed as the original Y by its painting with the tammar Y. However, the presence of sequences shared between the microdissected tammar Xp and Y on the swamp wallaby Y2 implies that the formation of the compound sex chromosomes involved addition of autosome(s) to both the original X and Y. We propose that this involved fusion with an ancient pseudoautosomal region followed by fission proximal to this shared region.