Gene loss shapes lineage-specific traits but is often overlooked in species survival. In this study, we investigate the role of ancestral gene loss using the extinction icon - thylacine (Thylacinus cynocephalus). While studies of neutral genetic variation indicate a population decline before extinction, the impact of thylacine-specific ancestral gene losses remains unexplored. The availability of a chromosomal-level genome of the extinct thylacine offers a unique opportunity for such comparative studies. Here, we leverage palaeogenomic data to compare gene presence/absence patterns between the Tasmanian devil and thylacine. We discovered ancestral (between 13-1 Ma) loss of SAMD9L, HSD17B13, CUZD1 and VWA7 due to multiple gene-inactivating mutations, corroborated by short-read sequencing. The loss of SAMD9 correlates with a carnivorous diet, with ancestral gene loss timing mirroring the thylacine's shift to hypercarnivory. Our genome-wide analysis reveals olfactory receptor loss and relaxed selection, aligning with reduced olfactory lobes in the thylacine, indicating olfaction is not its primary hunting sense. By integrating palaeogenomic data with comparative genomics, our study reveals ancestral gene losses and their impact on species fitness while providing a foundation for selecting candidate species and genes for thylacine de-extinction. Our approach can be extended to other extinct/endangered species, highlighting genetic factors for de-extinction/conservation efforts.