We examine the accretion and merger histories of central and satellite galaxies in a smoothed particle hydrodynamics (SPH) cosmological simulation that resolves galaxies down to 7 × 109 M⊙. Most friends-of-friends haloes in the simulation have a distinct central galaxy, typically 2–5 times more massive than the most massive satellite. As expected, satellites have systematically higher assembly redshifts than central galaxies of the same baryonic mass, and satellites in more massive haloes form earlier. However, contrary to the simplest expectations, satellite galaxies continue to accrete gas and convert it to stars; the gas accretion declines steadily over a period of 0.5–1 Gyr after the satellite halo merges with a larger parent halo. Satellites in a cluster mass halo eventually begin to lose baryonic mass. Typically, satellites in our simulation are 0.1–0.2 mag bluer than in models that assume no gas accretion on to satellites after a halo merger. Since z= 1, 27 per cent of central galaxies (above 3 × 1010 M⊙) and 22 per cent of present-day satellite galaxies have merged with a smaller system above a 1:4 mass ratio; about half of the satellite mergers occurred after the galaxy became a satellite and half before. In effect, satellite galaxies can remain ‘central’ objects of halo substructures, with continuing accretion and mergers, making the transition in assembly histories and physical properties a gradual one. Implementing such a gradual transformation in semi-analytic models would improve their agreement with observed colour distributions of satellite galaxies in groups and with the observed colour dependence of galaxy clustering.