The lactic acid bacterium Streptococcus thermophilus is widely used for the manufacture of yogurt and cheese. This dairy species of major economic importance is phylogenetically close to pathogenic streptococci, raising the possibility that it has a potential for virulence. Here we report the genome sequences of two yogurt strains of S. thermophilus. We found a striking level of gene decay (10% pseudogenes) in both microorganisms. Many genes involved in carbon utilization are nonfunctional, in line with the paucity of carbon sources in milk. Notably, most streptococcal virulence-related genes that are not involved in basic cellular processes are either inactivated or absent in the dairy streptococcus. Adaptation to the constant milk environment appears to have resulted in the stabilization of the genome structure. We conclude that S. thermophilus has evolved mainly through loss-of-function events that remarkably mirror the environment of the dairy niche resulting in a severely diminished pathogenic potential.