Safety is the most important criteria of any substance or microorganism applied in the food industry. The whole-genome sequencing (WGS) of an indigenous dairy isolate LL16 confirmed it to be Lactococcus lactis subsp. lactis with genome size 2,589,406 bp, 35.4% GC content, 246 subsystems, and 1 plasmid (repUS4). The Nextera XT library preparation kit was used to generate the DNA libraries, and the sequencing was carried out on an Illumina MiSeq platform. In silico analysis of L. lactis LL16 strain revealed non-pathogenicity and the absence of genes involved in transferable antimicrobial resistances, virulence, and formation of biogenic amines. One region in the L. lactis LL16 genome was identified as type III polyketide synthases (T3PKS) to produce putative bacteriocins lactococcin B, and enterolysin A. The probiotic and functional potential of L. lactis LL16 was investigated by the presence of genes involved in adhesion and colonization of the host’s intestines and tolerance to acid and bile, production of enzymes, amino acids, and B-group vitamins. Genes encoding the production of neurotransmitters serotonin and gamma-aminobutyric acid (GABA) were detected; however, L. lactis LL16 was able to produce only GABA during milk fermentation. These findings demonstrate a variety of positive features that support the use of L. lactis LL16 in the dairy sector as a functional strain with probiotic and GABA-producing properties.