Earthworms show a wide spectrum of regenerative potential with certain species like Eisenia fetida capable of regenerating more than two-thirds of their body while other closely related species, such as Paranais litoralis seem to have lost this ability. Earthworms belong to the phylum Annelida, in which the genomes of the marine oligochaete Capitella telata and the freshwater leech Helobdella robusta have been sequenced and studied. Herein, we report the transcriptomic changes in Eisenia fetida (Indian isolate) during regeneration. Following injury, E. fetida regenerates the posterior segments in a time spanning several weeks. We analyzed gene expression changes both in the newly regenerating cells and in the adjacent tissue, at early (15days post amputation), intermediate (20days post amputation) and late (30 days post amputation) by RNAseq based de novo assembly and comparison of transcriptomes. We also generated a draft genome sequence of this terrestrial red worm using short reads and mate-pair reads. An in-depth analysis of the miRNome of the worm showed that many miRNA gene families have undergone extensive duplications. Sox4, a master regulator of TGF-beta mediated epithelial-mesenchymal transition was induced in the newly regenerated tissue. Genes for several proteins such as sialidases and neurotrophins were identified amongst the differentially expressed transcripts. The regeneration of the ventral nerve cord was also accompanied by the induction of nerve growth factor and neurofilament genes. We identified 315 novel differentially expressed transcripts in the transcriptome, that have no homolog in any other species. Surprisingly, 82% of these novel differentially expressed transcripts showed poor potential for coding proteins, suggesting that novel ncRNAs may play a critical role in regeneration of earthworm.