Methylibium petroleiphilum PM1 is a methylotroph distinguished by its ability to completely metabolize the fuel oxygenate methyl tert-butyl ether (MTBE). Strain PM1 also degrades aromatic (benzene, toluene, and xylene) and straight-chain (C, to C,,) hydrocarbons present in petroleum products. Whole-genome analysis of PM1 revealed an similar to 4-Mb circular chromosome and an similar to 600-kb megaplasmid, containing 3,831 and 646 genes, respectively. Aromatic hydrocarbon and alkane degradation, metal resistance, and methylotrophy are encoded on the chromosome. The megaplasmid contains an unusual t-RNA island, numerous insertion sequences, and large repeated elements, including a 40-kb region also present on the chromosome and a 29-kb tandem repeat encoding phosphonate transport and cobalamin biosynthesis. The megaplasmid also codes for alkane degradation and was shown to play an essential role in MTBE degradation through plasmid-curing experiments. Discrepancies between the insertion sequence element distribution patterns, the distributions of best BLASTP hits among major phylogenetic groups, and the G+C contents of the chromosome (69.2%) and plasmid (66%), together with comparative genome hybridization experiments, suggest that the plasmid was recently acquired and apparently carries the genetic information responsible for PM1’s ability to degrade MTBE. Comparative genomic hybridization analysis with two PM1-like MTBE-degrading environmental isolates (similar to 99% identical 16S rRNA gene sequences) showed that the plasmid was highly conserved (ca. 99% identical), whereas the chromosomes were too diverse to conduct resequencing analysis. PM1’s genome sequence provides a foundation for investigating MTBE biodegradation and exploring the genetic regulation of multiple biodegradation pathways in M. petroleiphilum and other MTBE-degrading beta-proteobacteria.