Sugarcane ratoon stunting disease (RSD) caused by Leifsonia xyli subsp. xyli (Lxx) is a common destructive disease that occurs around the world. Lxx is an obligate pathogen of sugarcane, and previous studies have reported some physiological responses of RSD-affected sugarcane. However, the molecular understanding of sugarcane response to Lxx infection remains unclear. In the present study, transcriptomes of healthy and Lxx-infected sugarcane stalks and leaves were studied to gain more insights into the gene activity in sugarcane in response to Lxx infection. RNA-Seq analysis of healthy and diseased plants transcriptomes identified 107,750 unigenes. Analysis of these unigenes showed a large number of differentially expressed genes (DEGs) occurring mostly in leaves of infected plants. Sugarcane responds to Lxx infection mainly via alteration of metabolic pathways such as photosynthesis, phytohormone biosynthesis, phytohormone action-mediated regulation, and plant-pathogen interactions. It was also found that cell wall defense pathways and protein phosphorylation/dephosphorylation pathways may play important roles in Lxx pathogeneis. In Lxx-infected plants, significant inhibition in photosynthetic processes through large number of differentially expressed genes involved in energy capture, energy metabolism and chloroplast structure. Also, Lxx infection caused down-regulation of gibberellin response through an increased activity of DELLA and down-regulation of GID1 proteins. This alteration in gibberellic acid response combined with the inhibition of photosynthetic processes may account for the majority of growth retardation occurring in RSD-affected plants. A number of genes associated with plant-pathogen interactions were also differentially expressed in Lxx-infected plants. These include those involved in secondary metabolite biosynthesis, protein phosphorylation/dephosphorylation, cell wall biosynthesis, and phagosomes, implicating an active defense response to Lxx infection. Considering the fact that RSD occurs worldwide and a significant cause of sugarcane productivity, a better understanding of Lxx resistance-related processes may help develop tools and technologies for producing RSD-resistant sugarcane varieties through conventional and/or molecular breeding.