All life is organized as cells. Physical compartmentation from the environment and self–organization of self–contained redox reactions are the most conserved attributes of living things, hence inorganic matter with such attributes would be life's most likely forebear. We propose that life evolved in structured iron monosulphide precipitates in a seepage site hydrothermal mound at a redox, pH and temperature gradient between sulphide–rich hydrothermal fluid and iron(II)–containing waters of the Hadean ocean floor. The naturally arising, three–dimensional compartmentation observed within fossilized seepage–site metal sulphide precipitates indicates that these inorganic compartments were the precursors of cell walls and membranes found in free–living prokaryotes. The known capability of FeS and NiS to catalyse the synthesis of the acetyl–methylsulphide from carbon monoxide and methylsulphide, constituents of hydrothermal fluid, indicates that pre–biotic syntheses occurred at the inner surfaces of these metal–sulphide–walled compartments, which furthermore restrained reacted products from diffusion into the ocean, providing sufficient concentrations of reactants to forge the transition from geochemistry to biochemistry. The chemistry of what is known as the RNA–world could have taken place within these naturally forming, catalyticwalled compartments to give rise to replicating systems. Sufficient concentrations of precursors to support replication would have been synthesized in situ geochemically and biogeochemically, with FeS (and NiS) centres playing the central catalytic role. The universal ancestor we infer was not a free–living cell, but rather was confined to the naturally chemiosmotic, FeS compartments within which the synthesis of its constituents occurred. The first free–living cells are suggested to have been eubacterial and archaebacterial chemoautotrophs that emerged more than 3.8 Gyr ago from their inorganic confines. We propose that the emergence of these prokaryotic lineages from inorganic confines occurred independently, facilitated by the independent origins of membrane–lipid biosynthesis: isoprenoid ether membranes in the archaebacterial and fatty acid ester membranes in the eubacterial lineage. The eukaryotes, all of which are ancestrally heterotrophs and possess eubacterial lipids, are suggested to have arisen ca. 2 Gyr ago through symbiosis involving an autotrophic archaebacterial host and a heterotrophic eubacterial symbiont, the common ancestor of mitochondria and hydrogenosomes. The attributes shared by all prokaryotes are viewed as inheritances from their confined universal ancestor. The attributes that distinguish eubacteria and archaebacteria, yet are uniform within the groups, are viewed as relics of their phase of differentiation after divergence from the non–free–living universal ancestor and before the origin of the free–living chemoautotrophic lifestyle. The attributes shared by eukaryotes with eubacteria and archaebacteria, respectively, are viewed as inheritances via symbiosis. The attributes unique to eukaryotes are viewed as inventions specific to their lineage. The origin of the eukaryotic endomembrane system and nuclear membrane are suggested to be the fortuitous result of the expression of genes for eubacterial membrane lipid synthesis by an archaebacterial genetic apparatus in a compartment that was not fully prepared to accommodate such compounds, resulting in vesicles of eubacterial lipids that accumulated in the cytosol around their site of synthesis. Under these premises, the most ancient divide in the living world is that between eubacteria and archaebacteria, yet the steepest evolutionary grade is that between prokaryotes and eukaryotes.