Evolutionary success of microbial pathogens requires survival within hosts, despite the rapidly changing and lethal immune response. Pathogens such as the Lyme disease bacteria Borrelia burgdorferi have evolved antigenic variation systems that are necessary for survival within the adverse immune environment. Although antigenic variation systems are essential to both microbial pathogenesis and microbial evolution, it is largely unclear what selective forces have influenced the evolution of antigenic variation systems. In this thesis, we investigate evolution of the vls antigenic variation system in B. burgdorferi by asking two major questions: First, what traits relevant to the vls antigenic variation system have natural selection acted on? Second, how did the selective forces shape the genetic sequences of the vls antigenic variation systems? We characterize sources of natural selection using mathematical modeling, computational simulation and mutagenesis experiments. Our findings show that natural selection has promoted diversity among VlsE variants on both sequence and structure by organizing the variable sites in the vls unexpressed cassettes. We also show that the level of diversity among the VlsE variants may strongly influence the within-host dynamics of Bb, an important fitness component of B. burgdorferi. Finally, our results indicate that diversity among VlsE variants might be constrained by purifying or stabilizing selections on translational efficiency and structural stability of the VlsE variants.