Background Candida parapsilosis is a common cause of invasive candidiasis, especially in newborn infants, and infections have been increasing over the past two decades. C. parapsilosis has been primarily studied in pure culture, leaving gaps in understanding of its function in a microbiome context. Results. Here, we compare five unique C. parapsilosis genomes assembled from premature infant fecal samples, three of which are newly reconstructed, and analyze their genome structure, population diversity, and in situ activity relative to reference strains in pure culture. All five genomes contain hotspots of single nucleotide variants, some of which are shared by strains from multiple hospitals. A subset of environmental and hospital-derived genomes share variants within these hotspots suggesting derivation of that region from a common ancestor. Four of the newly reconstructed C. parapsilosis genomes have 4 to 16 copies of the gene RTA3, which encodes a lipid translocase and is implicated in antifungal resistance, potentially indicating adaptation to hospital antifungal use. Time course metatranscriptomics and metaproteomics on fecal samples from a premature infant with a C. parapsilosis blood infection revealed highly variable in situ expression patterns that are distinct from those of similar strains in pure cultures. For example, biofilm formation genes were relatively less expressed in situ, whereas genes linked to oxygen utilization were more highly expressed, indicative of growth in a relatively aerobic environment. In gut microbiome samples, C. parapsilosis co-existed with Enterococcus faecalis that shifted in relative abundance over time, accompanied by changes in bacterial and fungal gene expression and proteome composition. Conclusions The results reveal potentially medically relevant differences in Candida function in gut vs. laboratory environments, and constrain evolutionary processes that could contribute to hospital strain persistence and transfer into premature infant microbiomes.