Vesper bats (family Vespertilionidae) experienced a rapid adaptive radiation beginning around 36 Ma that resulted in the second most species-rich mammalian family (>400 species). Coincident with that radiation was an initial burst of DNA transposon activity that has continued into the present in some species. Such extensive and recent DNA transposon activity has not been seen in any other extant mammal. Indeed, retrotransposon activity is much more common in all other sequenced mammal genomes. Deep sequencing of the small RNA fraction from a vespertilionid bat, Eptesicus fuscus, as well as a dog and horse revealed large numbers of 17-24 bp putative miRNAs (p/miRNAs). Although the origination rate of p/miRNAs is similar in all three taxa, 61.1% of postdivergence p/miRNAs in Eptesicus are derived from transposable elements (TEs) compared with only 23.9% and 16.5% in the dog and horse, respectively. Not surprisingly, given the retrotransposon bias of dog and horse, the majority of TE-derived p/miRNAs are associated with retrotransposons. In Eptesicus, however, 58.7% of the TE-derived and 35.9% of the total p/miRNAs arose not from retrotransposons but from bat-specific DNA transposons. Notably, we observe that the timing of the DNA transposon expansion and the resulting introduction of novel p/miRNAs coincide with the rapid diversification of the family Vespertilionidae. Furthermore, potential targets of the DNA transposon-derived p/miRNAs are identifiable and enriched for genes that are important for regulation of transcription. We propose that lineage-specific DNA transposon activity lead to the rapid and repeated introduction of novel p/miRNAs. Some of these p/miRNAs are likely functional miRNAs and potentially influenced the diversification of Vespertilionidae. Our observations suggest a mechanism for introducing functional genomic variation rapidly through the expansion of DNA transposons that fits within the TE-thrust hypothesis.