The genome sequence of Leifsonia xyli subsp. xyli, which causes ratoon stunting disease and affects sugarcane worldwide, was determined. The single circular chromosome of Leifsonia xyli subsp. xyli CTCB07 was 2.6 Mb in length with a GC content of 68% and 2,044 predicted open reading frames. The analysis also revealed 307 predicted pseudogenes, which is more than any bacterial plant pathogen sequenced to date. Many of these pseudogenes, if functional, would likely be involved in the degradation of plant heteropolysaccharides, uptake of free sugars, and synthesis of amino acids. Although L. xyli subsp. xyli has only been identified colonizing the xylem vessels of sugarcane, the numbers of predicted regulatory genes and sugar transporters are similar to those in free-living organisms. Some of the predicted pathogenicity genes appear to have been acquired by lateral transfer and include genes for cellulase, pectinase, wilt-inducing protein, lysozyme, and desaturase. The presence of the latter may contribute to stunting, since it is likely involved in the synthesis of abscisic acid, a hormone that arrests growth. Our findings are consistent with the nutritionally fastidious behavior exhibited by L. xyli subsp. xyli and suggest an ongoing adaptation to the restricted ecological niche it inhabits.