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We report here the sequencing and analysis of the genome of the nitrogen-fixing endophyte, Klebsiella pneumoniae 342. Although K. pneumoniae 342 is a member of the enteric bacteria, it serves as a model for studies of endophytic, plant-bacterial associations due to its efficient colonization of plant tissues (including maize and wheat, two of the most important crops in the world), while maintaining a mutualistic relationship that encompasses supplying organic nitrogen to the host plant. Genomic analysis examined K. pneumoniae 342 for the presence of previously identified genes from other bacteria involved in colonization of, or growth in, plants. From this set, approximately one-third were identified in K. pneumoniae 342, suggesting additional factors most likely contribute to its endophytic lifestyle. Comparative genome analyses were used to provide new insights into this question. Results included the identification of metabolic pathways and other features devoted to processing plant-derived cellulosic and aromatic compounds, and a robust complement of transport genes (15.4%), one of the highest percentages in bacterial genomes sequenced. Although virulence and antibiotic resistance genes were predicted, experiments conducted using mouse models showed pathogenicity to be attenuated in this strain. Comparative genomic analyses with the presumed human pathogen K. pneumoniae MGH78578 revealed that MGH78578 apparently cannot fix nitrogen, and the distribution of genes essential to surface attachment, secretion, transport, and regulation and signaling varied between each genome, which may indicate critical divergences between the strains that influence their preferred host ranges and lifestyles (endophytic plant associations for K. pneumoniae 342 and presumably human pathogenesis for MGH78578). Little genome information is available concerning endophytic bacteria. The K. pneumoniae 342 genome will drive new research into this less-understood, but important category of bacterial-plant host relationships, which could ultimately enhance growth and nutrition of important agricultural crops and development of plant-derived products and biofuels.