Summary Ecteinascidin 743 (ET-743, Yondelis) is a clinically approved chemotherapeutic natural product isolated from the Caribbean mangrove tunicate Ecteinascidia turbinata. Researchers have long suspected that a microorganism may be the true producer of the anti-cancer drug, but its genome has remained elusive due to our inability to culture the bacterium in the laboratory using standard techniques. Here, we sequenced and assembled the complete genome of the ET-743 producer, Candidatus Endoecteinascidia frumentensis, directly from metagenomic DNA isolated from the tunicate. Analysis of the ~631 kb microbial genome revealed strong evidence of an endosymbiotic lifestyle and extreme genome reduction. Phylogenetic analysis suggested that the producer of the anti-cancer drug is taxonomically distinct from other sequenced microorganisms and could represent a new family of Gammaproteobacteria. The complete genome has also greatly expanded our understanding of ET-743 production and revealed new biosynthetic genes dispersed across more than 173 kb of the small genome. The gene cluster’s architecture and its preservation demonstrate that the drug is likely essential to the interactions of the microorganism with its mangrove tunicate host. Taken together, these studies elucidate the lifestyle of a unique, and pharmaceutically-important microorganism and highlight the wide diversity of bacteria capable of making potent natural products.