Bacteria of the genus Xenorhabdus are symbionts of soil entomopathogenic nematodes of the genus Steinernema. This symbiotic association constitutes an insecticidal complex active against a wide range of insect pests. Unlike other Xenorhabdus species, Xenorhabdus poinarii is avirulent when injected into insects in the absence of its nematode host. We sequenced the genome of the X. poinarii strain G6 and the closely related but virulent Xenorhabdus doucetiae strain FRM16. G6 had a smaller genome (500-700 kb smaller) than virulent Xenorhabdus strains and lacked genes encoding potential virulence factors (haemolysins, type 5 secretion systems, enzymes involved in the synthesis of secondary metabolites, toxin-antitoxin systems). The genomes of all the X. poinarii strains analysed here had a similar small size. We did not observe the accumulation of pseudogenes, insertion sequences or decrease in coding density usually seen as a sign of genomic erosion driven by genetic drift in host-adapted bacteria. Instead, genome reduction of X. poinarii seems to have been mediated by the excision of genomic blocks from the flexible genome, as reported for the genomes of attenuated free pathogenic bacteria and some facultative mutualistic bacteria growing exclusively within hosts. This evolutionary pathway probably reflects the adaptation of X. poinarii to specific host.