Yersinia pestis , the causative agent of plague, is a highly uniform clone that diverged recently from the enteric pathogen Yersinia pseudotuberculosis . Despite their close genetic relationship, they differ radically in their pathogenicity and transmission. Here, we report the complete genomic sequence of Y. pseudotuberculosis IP32953 and its use for detailed genome comparisons with available Y. pestis sequences. Analyses of identified differences across a panel of Yersinia isolates from around the world reveal 32 Y. pestis chromosomal genes that, together with the two Y. pestis -specific plasmids, to our knowledge, represent the only new genetic material in Y. pestis acquired since the the divergence from Y. pseudotuberculosis . In contrast, 149 other pseudogenes (doubling the previous estimate) and 317 genes absent from Y. pestis were detected, indicating that as many as 13% of Y. pseudotuberculosis genes no longer function in Y. pestis . Extensive insertion sequence-mediated genome rearrangements and reductive evolution through massive gene loss, resulting in elimination and modification of preexisting gene expression pathways, appear to be more important than acquisition of genes in the evolution of Y. pestis . These results provide a sobering example of how a highly virulent epidemic clone can suddenly emerge from a less virulent, closely related progenitor.