During evolution, novel phenotypes emerge through changes in gene expression, but the genetic basis is poorly understood. We compared the allele-specific expression of two yeast species and their hybrid, which allowed us to distinguish changes in regulatory sequences of the gene itself (cis) from changes in upstream regulatory factors (trans). Expression divergence between species was generally due to changes in cis. Divergence in trans reflected a differential response to the environment and explained the tendency of certain genes to diverge rapidly. Hybrid-specific expression, deviating from the parental range, occurred through novel cis-trans interactions or, more often, through modified trans regulation associated with environmental sensing. These results provide insights on the regulatory changes in cis and trans during the divergence of species and upon hybridization.