Many organisms secrete xylanase, an import group of proteins hydrolyzing xylan, and thus are able to use xylan as their carbon source. In this study, we sequenced the whole genome of a bacterial strain, YD01, which was isolated from the sludge near the sewage discharge outlet of a papermill and showed high alkalic xylanase activity. Its genome consists of a chromosome and two plasmids. Six rRNA genes, 46 tRNA genes, 3136 CDSs as well as 955 repetitive sequences were predicted. 3046 CDSs were functionally annotated. Phylogenetic analysis on 16S rRNA shows that YD01 is a new species inMicrobacteriumgenus and is taxonomically close toM. jejuenseTHG-C31(T)andM. kyungheenseTHG-C26(T). A comparative study on phylogenetic trees of 16S rRNA and xylanase genes suggests that xylanase genes in YD01 may originate from horizontal gene transfer instead of ancestral gene duplication.