Archaeal cells have unique properties separating them from the other two domains, Bacteria and Eukaryota. Archaea are further divided into multiple recognized phyla. Classification is difficult because most have not been isolated in the laboratory and have only been detected by analysis of their nucleic acids in samples from their environment.

The first observed archaea were extremophiles, living in harsh environments, such as hot springs and salt lakes with no other organisms, but improved detection tools led to the discovery of archaea in almost every habitat, including soil, oceans, and marshlands. They are also part of the microbiota of all organisms, and in the human microbiota they are important in the gut, mouth, and on the skin. Archaea are particularly numerous in the oceans, and the archaea in plankton may be one of the most abundant groups of organisms on the planet. Archaea are a major part of Earth's life, and may play roles in the carbon cycle and the nitrogen cycle. No clear examples of archaeal pathogens or parasites are known. Instead they are often mutualists or commensals, such as the methanogens (methane-producing strains) that inhabit the gastrointestinal tract in humans and ruminants, where their vast numbers aid digestion. Methanogens are also used in biogas production and sewage treatment, and biotechnology exploits enzymes from extremophile archaea that can endure high temperatures and organic solvents.

Although probable prokaryotic cell fossils date to almost 3.5 billion years ago, most prokaryotes do not have distinctive morphologies and fossil shapes cannot be used to identify them as archaea. Instead, chemical fossils of unique lipids are more informative because such compounds do not occur in other organisms. Some publications suggest that archaeal or eukaryotic lipid remains are present in shales dating from 2.7 billion years ago; such data have since been questioned. Such lipids have also been detected in even older rocks from west Greenland. The oldest such traces come from the Isua district, which includes Earth's oldest known sediments, formed 3.8 billion years ago. The archaeal lineage may be the most ancient that exists on Earth.

Woese used his new rRNA comparison method to categorize and contrast different organisms. He compared a variety of species and happened upon a group of methanogens with rRNA vastly different from any known prokaryotes or eukaryotes. These methanogens were much more similar to each other than to other organisms, leading Woese to propose the new domain of Archaea. His experiments showed that the archaea were genetically more similar to eukaryotes than prokaryotes, even though they were more similar to prokaryotes in structure. This led to the conclusion that Archaea and Eukarya shared a more recent common ancestor than Eukarya and Bacteria. The development of the nucleus occurred after the split between Bacteria and this common ancestor.

It has been proposed that the archaea evolved from gram-positive bacteria in response to antibiotic selection pressure. This is suggested by the observation that archaea are resistant to a wide variety of antibiotics that are primarily produced by gram-positive bacteria, and that these antibiotics primarily act on the genes that distinguish archaea from bacteria. The proposal is that the selective pressure towards resistance generated by the gram-positive antibiotics was eventually sufficient to cause extensive changes in many of the antibiotics' target genes, and that these strains represented the common ancestors of present-day Archaea. The evolution of Archaea in response to antibiotic selection, or any other competitive selective pressure, could also explain their adaptation to extreme environments (such as high temperature or acidity) as the result of a search for unoccupied niches to escape from antibiotic-producing organisms; Cavalier-Smith has made a similar suggestion. This proposal is also supported by other work investigating protein structural relationships and studies that suggest that gram-positive bacteria may constitute the earliest branching lineages within the prokaryotes.

Archaea are genetically distinct from bacteria and eukaryotes, with up to 15% of the proteins encoded by any one archaeal genome being unique to the domain, although most of these unique genes have no known function. Of the remainder of the unique proteins that have an identified function, most belong to the Euryarchaea and are involved in methanogenesis. The proteins that archaea, bacteria and eukaryotes share form a common core of cell function, relating mostly to transcription, translation, and nucleotide metabolism. Other characteristic archaeal features are the organization of genes of related function such as enzymes that catalyze steps in the same metabolic pathway into novel operons, and large differences in tRNA genes and their aminoacyl tRNA synthetases.

Archaea carry out many steps in the nitrogen cycle. This includes both reactions that remove nitrogen from ecosystems (such as nitrate-based respiration and denitrification) as well as processes that introduce nitrogen (such as nitrate assimilation and nitrogen fixation). Researchers recently discovered archaeal involvement in ammonia oxidation reactions. These reactions are particularly important in the oceans. The archaea also appear crucial for ammonia oxidation in soils. They produce nitrite, which other microbes then oxidize to nitrate. Plants and other organisms consume the latter.