The domesticated carmine cochineal Dactylopius coccus (scale insect) has commercial value and has been used for more than 500 years for natural red pigment production. Besides the domesticated cochineal, other wild Dactylopius species such as Dactylopius opuntiae are found in the Americas, all feeding on nutrient poor sap from native cacti. To compensate nutritional deficiencies, many insects harbor symbiotic bacteria which provide essential amino acids or vitamins to their hosts. Here, we characterized a symbiont from the carmine cochineal insects, Candidatus Dactylopiibacterium carminicum (betaproteobacterium, Rhodocyclaceae family) and found it in D. coccus and in D. opuntiae ovaries by fluorescent in situ hybridization, suggesting maternal inheritance. Bacterial genomes recovered from metagenomic data derived from whole insects or tissues both from D. coccus and from D. opuntiae were around 3.6 Mb in size. Phylogenomics showed that dactylopiibacteria constituted a closely related clade neighbor to nitrogen fixing bacteria from soil or from various plants including rice and other grass endophytes. Metabolic capabilities were inferred from genomic analyses, showing a complete operon for nitrogen fixation, biosynthesis of amino acids and vitamins and putative traits of anaerobic or microoxic metabolism as well as genes for plant interaction. Dactylopiibacterium nif gene expression and acetylene reduction activity detecting nitrogen fixation were evidenced in D. coccus hemolymph and ovaries, in congruence with the endosymbiont fluorescent in situ hybridization location. Dactylopiibacterium symbionts may compensate for the nitrogen deficiency in the cochineal diet. In addition, this symbiont may provide essential amino acids, recycle uric acid, and increase the cochineal life span.