Banana Xanthomonas wilt is a newly emerging disease that is currently threatening the livelihoods of millions of farmers in East Africa. The causative agent is Xanthomonas campestris pathovar musacearum (Xcm), but previous work suggests that this pathogen is much more closely related to species Xanthomonas vasicola than to X. campestris. We have generated draft genome sequences for a banana-pathogenic strain of Xcm isolated in Uganda and for a very closely related strain of X. vasicola pathovar vasculorum, originally isolated from sugarcane, that is nonpathogenic on banana. The draft sequences revealed overlapping but distinct repertoires of candidate virulence effectors in the two strains. Both strains encode homologues of the Pseudomonas syringae effectors HopW, HopAF1 and RipT from Ralstonia solanacearum. The banana-pathogenic and non-banana-pathogenic strains also differed with respect to lipopolysaccharide synthesis and type-IV pili, and in at least several thousand single-nucleotide polymorphisms in the core conserved genome. We found evidence of horizontal transfer between X. vasicola and very distantly related bacteria, including members of other divisions of the Proteobacteria. The availability of these draft genomes will be an invaluable tool for further studies aimed at understanding and combating this important disease.