Burkholderia pseudomallei is a recognized biothreat agent and the causative agent of melioidosis. This Gram-negative bacterium exists as a soil saprophyte in melioidosis-endemic areas of the world and accounts for 20% of community-acquired septicaemias in northeastern Thailand where half of those affected die. Here we report the complete genome of B. pseudomallei, which is composed of two chromosomes of 4.07 megabase pairs and 3.17 megabase pairs, showing significant functional partitioning of genes between them. The large chromosome encodes many of the core functions associated with central metabolism and cell growth, whereas the small chromosome carries more accessory functions associated with adaptation and survival in different niches. Genomic comparisons with closely and more distantly related bacteria revealed a greater level of gene order conservation and a greater number of orthologous genes on the large chromosome, suggesting that the two replicons have distinct evolutionary origins. A striking feature of the genome was the presence of 16 genomic islands (GIs) that together made up 6.1% of the genome. Further analysis revealed these islands to be variably present in a collection of invasive and soil isolates but entirely absent from the clonally related organism B. mallei. We propose that variable horizontal gene acquisition by B. pseudomallei is an important feature of recent genetic evolution and that this has resulted in a genetically diverse pathogenic species.