Since its accidental introduction to Massachusetts in the late 1800s, the European gypsy moth (EGM; Lymantria dispar dispar) has become a major defoliator in North American forests. However, in part because females are flightless, the spread of the EGM across the United States and Canada has been relatively slow over the past 150 years. In contrast, females of the Asian gypsy moth (AGM; Lymantria dispar asiatica) subspecies have fully developed wings and can fly, thereby posing a serious economic threat if populations are established in North America. To explore the genetic determinants of these phenotypic differences, we sequenced and annotated a draft genome of L. dispar and used it to identify genetic variation between EGM and AGM populations. The 865-Mb gypsy moth genome is the largest Lepidoptera genome sequenced to date and encodes ∼13,300 proteins. Gene ontology analyses of EGM and AGM samples revealed divergence between these populations in genes enriched for several gene ontology categories related to muscle adaptation, chemosensory communication, detoxification of food plant foliage, and immunity. These genetic differences likely contribute to variations in flight ability, chemical sensing, and pathogen interactions among EGM and AGM populations. Finally, we use our new genomic and transcriptomic tools to provide insights into genome-wide gene-expression changes of the gypsy moth after viral infection. Characterizing the immunological response of gypsy moths to virus infection may aid in the improvement of virus-based bioinsecticides currently used to control larval populations.