Rickettsia peacockii, also known as the East Side Agent, is a non-pathogenic obligate intracellular bacterium found as an endosymbiont in Dermacentor andersoni ticks in the western USA and Canada. Its presence in ticks is correlated with reduced prevalence of Rickettsia rickettsii, the agent of Rocky Mountain Spotted Fever. It has been proposed that a virulent SFG rickettsia underwent changes to become the East Side Agent. We determined the genome sequence of R. peacockii and provide a comparison to a closely related virulent R. rickettsii. The presence of 42 chromosomal copies of the ISRpe1 transposon in the genome of R. peacockii is associated with a lack of synteny with the genome of R. rickettsii and numerous deletions via recombination between transposon copies. The plasmid contains a number of genes from distantly related organisms, such as part of the glycosylation island of Pseudomonas aeruginosa. Genes deleted or mutated in R. peacockii which may relate to loss of virulence include those coding for an ankyrin repeat containing protein, DsbA, RickA, protease II, OmpA, ScaI, and a putative phosphoethanolamine transferase. The gene coding for the ankyrin repeat containing protein is especially implicated as it is mutated in R. rickettsii strain Iowa, which has attenuated virulence. Presence of numerous copies of the ISRpe1 transposon, likely acquired by lateral transfer from a Cardinium species, are associated with extensive genomic reorganization and deletions. The deletion and mutation of genes possibly involved in loss of virulence have been identified by this genomic comparison. It also illustrates that the introduction of a transposon into the genome can have varied effects; either correlating with an increase in pathogenicity as in Francisella tularensis or a loss of pathogenicity as in R. peacockii and the recombination enabled by multiple transposon copies can cause significant deletions in some genomes while not in others.