The species Xanthomonas oryzae is comprised of two designated pathovars, both of which cause economically significant diseases of rice in Asia and Africa. Although X. oryzae is not considered endemic in the United States, an X. oryzae-like bacterium was isolated from U.S. rice and southern cutgrass in the late 1980s. The U.S. strains were weakly pathogenic and genetically distinct from characterized X. oryzae pathovars. In the current study, a draft genome sequence from two U.S. Xanthomonas strains revealed that the U.S. strains form a novel clade within the X. oryzae species, distinct from all strains known to cause significant yield loss. Comparative genome analysis revealed several putative gene clusters specific to the U.S. strains and supported previous reports that the U.S. strains lack transcriptional activator-like (TAL) effectors. In addition to phylogenetic and comparative analyses, the genome sequence was used for designing robust U.S. strain-specific primers, demonstrating the usefulness of a draft genome sequence in the rapid development of diagnostic tools.