Background The colonial cyanobacterium Microcystis proliferates in a wide range of freshwater ecosystems and is exposed to changing environmental factors during its life cycle. Microcystis blooms are often toxic, potentially fatal to animals and humans, and may cause environmental problems. There has been little investigation of the genomics of these cyanobacteria. Results Deciphering the 5,172,804 bp sequence of Microcystis aeruginosa PCC 7806 has revealed the high plasticity of its genome: 11.7% DNA repeats containing more than 1,000 bases, 6.8% putative transposases and 21 putative restriction enzymes. Compared to the genomes of other cyanobacterial lineages, strain PCC 7806 contains a large number of atypical genes that may have been acquired by lateral transfers. Metabolic pathways, such as fermentation and a methionine salvage pathway, have been identified, Conclusion Microcystis aeruginosa PCC 7806 appears to have adopted an evolutionary strategy relying on unusual genome plasticity to adapt to eutrophic freshwater ecosystems, a property shared by another strain of M. aeruginosa (NIES-843). Comparisons of the genomes of PCC 7806 and other cyanobacterial strains indicate that a similar strategy may have also been used by the marine strain Crocosphaera watsonii WH8501 to adapt to other ecological niches, such as oligotrophic open oceans.