Background: Malaria parasite species differ greatly in the harm they do to humans. While P. falciparum kills hundreds of thousands per year, P. vivax kills much less often and P. malariae is relatively benign. Strains of the rodent malaria parasite Plasmodium chabaudi show phenotypic variation in virulence during infections of laboratory mice. This make it an excellent species to study genes which may be responsible for this trait. By understanding the mechanisms which underlie differences in virulence we can learn how parasites adapt to their hosts and how we might prevent disease. Methods: Here we present a complete reference genome sequence for a more virulent P. chabaudi strain, PcCB, and perform a detailed comparison with the genome of the less virulent PcAS strain. Results: We found the greatest variation in the subtelomeric regions, in particular amongst the sequences of the pir gene family, which has been associated with virulence and establishment of chronic infection. However, despite substantial variation at the sequence level, the repertoire of these genes has been largely maintained, highlighting the requirement for functional conservation as well as diversification in host-parasite interactions. However, a subset of pir genes, previously associated with increased virulence, were more highly expressed in PcCB, suggesting a role for this gene family in virulence differences between strains. We found that core genes involved in red blood cell invasion have been under positive selection and that the more virulent strain has a greater preference for reticulocytes, which has elsewhere been associated with increased virulence. Conclusions: These results provide the basis for a mechanistic understanding of the phenotypic differences between Plasmodium chabaudi strains, which might ultimately be translated into a better understanding of malaria parasites affecting humans.