Background: Daphnia pulex (Water flea) is the first fully sequenced crustacean genome. The crustaceans and insects have diverged from a common ancestor. It is a model organism for studying the molecular makeup for coping with the environmental challenges. In the complete proteome, there are 30,550 putative proteins. However, about 10,000 of them have no known homologues. Currently, the UniProtoKB reports on 95% of the Daphnia's proteins as putative and uncharacterized proteins.Results: We have applied ProtoNet, an unsupervised hierarchical protein clustering method that covers about 10 million sequences, for automatic annotation of the Daphnia's proteome. 98.7% (26,625) of the Daphnia full-length proteins were successfully mapped to 13,880 ProtoNet stable clusters, and only 1.3% remained unmapped. We compared the properties of the Daphnia's protein families with those of the mouse and the fruitfly proteomes. Functional annotations were successfully assigned for 86% of the proteins. Most proteins (61%) were mapped to only 2953 clusters that contain Daphnia's duplicated genes. We focused on the functionality of maximally amplified paralogs. Cuticle structure components and a variety of ion channels protein families were associated with a maximal level of gene amplification. We focused on gene amplification as a leading strategy of the Daphnia in coping with environmental toxicity.Conclusions: Automatic inference is achieved through mapping of sequences to the protein family tree of ProtoNet 6.0. Applying a careful inference protocol resulted in functional assignments for over 86% of the complete proteome. We conclude that the scaffold of ProtoNet can be used as an alignment-free protocol for large-scale annotation task of uncharacterized proteomes.