Evolution of complexity in eukaryotic proteomes has arisen, in part, through emergence of modular independently folded domains mediating protein interactions via binding to short linear peptides in proteins. Over 30 years, structural properties and sequence preferences of these peptides have been extensively characterized. Less successful, however, were efforts to establish relationships between physicochemical properties and functions of domain–peptide interactions. To our knowledge, we have devised the first strategy to exhaustively explore the binding specificity of protein domain–peptide interactions. We applied the strategy to SH3 domains to determine the properties of their binding peptides starting from various experimental data. The strategy identified the majority (∼70%) of experimentally determined SH3 binding sites. We discovered mutual relationships among binding specificity, binding affinity, and structural properties and evolution of linear peptides. Remarkably, we found that these properties are also related to functional diversity, defined by depth of proteins within hierarchies of gene ontologies. Our results revealed that linear peptides evolved to coadapt specificity and affinity to functional diversity of domain–peptide interactions. Thus, domain–peptide interactions follow human-constructed gene ontologies, which suggest that our understanding of biological process hierarchies reflect the way chemical and thermodynamic properties of linear peptides and their interaction networks, in general, have evolved.