Despite the expected homogenizing effects of extensive gene flow, the third chromosome of Drosophila pseudoobscura is polymorphic for > 30 gene arrangements that are distributed over a stable gradient in frequency across the American Southwest. Furthermore, no chromosome arrangement has been detected at complete fixation in any ecological niche and heterokaryotypes can form at appreciable frequencies. Inversions may become established in populations due to (1) direct effects of the inversion mutation, (2) indirect effects of suppressed recombination where different arrangements capture adaptive alleles and maintain associations of multiple selected genes, (3) the capture of a single sweeping adaptive allele, or (4) random genetic drift. We tested hypotheses regarding the establishment of inversions by sequencing the complete genomes of 54 D. pseudoobscura strains that include multiple copies of six common arrangements. Additionally, we quantified gene expression across three life stages and tested for differential gene expression between arrangement homokaryotypes and heterokaryotypes. We find evidence for high levels of genetic differentiation across inverted regions of the third chromosome and observe a significant overabundance of derived allele and amino acid frequency changes. The number of selected genes within an arrangement is positively correlated to the size of the inversion mutation, which is consistent with models of local adaptation that find that the size of an inversion is proportional to the number of genes contributing to local adaptation. Inverted regions also harbor significantly different patterns of gene transcription between homokaryotypes, yet in heterokaryotypes we find prevalent additive interactions of gene copies derived from different chromosome arrangements. Genes involved in odorant and sensory perception pathways are significantly enriched for both differential expression and derived amino acid changes. Our results provide evidence that inversions have become established in D. pseudoobscura through the indirect effects of suppressed recombination that have maintained genetic and transcriptional differences across arrangements. We further expand upon existing theory and propose a multi-locus model to explain the existence of a stable gradient as a result of local adaptation across a heterogeneous environment.