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Cyanobacteria
Cyanobacteria are prokaryotes. They lack a complex internal structure, are single-cell organisms, and are capable of photosynthesis. Fossil records indicate that they've existed for at least 3.5 billion years -- they still exist in great numbers today, and produce roughly 50 percent of the oxygen in Earth's atmosphere. Approximately 2.3 billion years ago, cyanobacteria became so successful in their survival and reproduction (through binary fission) that they contributed to the huge increase in the amount of oxygen in the atmosphere that began at that time.
Endosymbiosis Between Cyanobacteria and Plant Cells
Approximately 2.0 billion years ago -- though some experts think it may be as long ago as 3.0 billion years b.p. -- the earliest forms of eukaryotes emerged. These organisms had evolved from the cyanobacteria and were what would become eukaryotes, or green plants, but at the time were likely similar to brown algae -- and they struggled to respire in the new, oxygen-rich environment. So the emerging eukaryotes entered into a symbiotic relationship with the cyanobacteria and used the cyanobacteria to perform their respiration for them. Symbiosis is when two organisms are in a mutually beneficial relationship with one another. The type of symbiotic relationship that developed between cyanobacteria and green plants was endosymbiosis -- meaning that one of the symbiotic organisms, in this case the cyanobacterium, lived within the other symbiotic organism, in this case the eukaryote. The specifics of how the endosymbiotic relationship evolved are unknown.
Specialization of the Chloroplast
Over the millions of years that followed the development of the endosymbiotic relationship between the cyanobacteria and the eukaryote, the cyanobacteria that lived within plant cells became so specialized in photosynthesis that they stopped performing most other functions on their own, and relied on the organelles within the plant cells to provide those necessary functions. The plant-cell-dwelling cyanobacterium became so specialized that today it is only an organelle -- the chloroplast -- within the plant cell, and not an organism that could live on its own. However, the chloroplast still retains some characteristics of an organism separate from the plant it lives inside. For example, the chloroplast retains its own set of DNA, which is distinct from the plant's DNA.
Reproduction of the Chloroplast
Over the millions of years during which the cyanobacteria specialized to become the chloroplast, it didn't lose the ability to reproduce through binary fission. Since the chloroplast's DNA is distinct from the plant cell's, the cell's nucleus can't copy the chloroplast's DNA. Instead, the chloroplast's ribosomes, which are also distinct from the plant cell's, reproduce the chloroplast's DNA within the chloroplast itself. Unlike the plant cell's DNA, the chloroplast's DNA is circular and bare, and includes the coding necessary for the performance of photosynthesis.