Background Genomes sequenced using short-read, next-generation sequencing technologies can have many errors and may be fragmented into thousands of small contigs. These incomplete and fragmented assemblies lead to errors in gene identification, such that single genes spread across multiple contigs are annotated as separate gene models. Such biases can confound inferences about the number and identity of genes within species, as well as gene gain and loss between species. Results We present AGOUTI (Annotated Genome Optimization Using Transcriptome Information), a tool that uses RNA sequencing data to simultaneously combine contigs into scaffolds and fragmented gene models into single models. We show that AGOUTI improves both the contiguity of genome assemblies and the accuracy of gene annotation, providing updated versions of each as output. Running AGOUTI on both simulated and real datasets, we show that it is highly accurate and that it achieves greater accuracy and contiguity when compared with other existing methods. Conclusion AGOUTI is a powerful and effective scaffolder and, unlike most scaffolders, is expected to be more effective in larger genomes because of the commensurate increase in intron length. AGOUTI is able to scaffold thousands of contigs while simultaneously reducing the number of gene models by hundreds or thousands. The software is available free of charge under the MIT license.