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ABSTRACT Mycobacterium shottsii is a dysgonic, nonpigmented mycobacterium originally isolated from diseased striped bass (Morone saxatilis) in the Chesapeake Bay, USA. Genomic analysis reveals that M. shottsii is a Mycobacterium ulcerans/Mycobacterium marinum clade (MuMC) member, but unlike the superficially similar M. pseudoshottsii, also isolated from striped bass, it is not an M. ulcerans ecovar, instead belonging to a transitional group of strains basal to proposed “Aronson” and “M” lineages. Although phylogenetically distinct from the human pathogen M. ulcerans, the M. shottsii genome shows parallel but nonhomologous genomic degeneration, including massive accumulation of pseudogenes accompanied by proliferation of unique insertion sequences (ISMysh01, ISMysh03), large-scale deletions, and genomic reorganization relative to typical M. marinum strains. Coupled with its observed ecological characteristics and loss of chromogenicity, the genomic structure of M. shottsii is suggestive of evolution toward a state of obligate pathogenicity, as observed for other Mycobacterium spp., including M. ulcerans, M. tuberculosis, and M. leprae. IMPORTANCE Morone saxatilis (striped bass) is an ecologically and economically important finfish species on the United States east coast. Mycobacterium shottsii and Mycobacterium pseudoshottsii were originally described in the early 2000s as novel species from outbreaks of visceral and dermal mycobacteriosis in this species. Biochemical and genetic characterization place these species within the Mycobacterium ulcerans/M. marinum clade (MuMC), and M. pseudoshottsii has been proposed as an ecovar of M. ulcerans. Here, we describe the complete genome of M. shottsii, demonstrating that it is clearly not an M. ulcerans ecovar; however, it has undergone parallel genomic modification suggestive of a transition to obligate pathogenicity. As in M. ulcerans, the M. shottsii genome demonstrates widespread pseudogene formation driven by proliferation of insertion sequences, as well as genomic reorganization. This work clarifies the phylogenetic position of M. shottsii relative to other MuMC members and provides insight into processes shaping its genomic structure.