Microbial metabolic processes greatly impact ecosystem functioning and the physiology of multi-cellular host organisms. The inference of metabolic capabilities and phenotypes from genome sequences with the help of prior biomolecular knowledge stored in online databases remains a major challenge in systems biology. Here, we present gapseq: a novel tool for automated pathway prediction and metabolic network reconstruction from microbial genome sequences. gapseq combines databases of reference protein sequences (UniProt, TCDB), in tandem with pathway and reaction databases (MetaCyc, KEGG, ModelSEED). This enables the statistical prediction of an organism's metabolic capabilities from sequence homology and pathway topology criteria. By incorporating a novel LP-based gap-filling algorithm, gapseq facilitates the construction of genomescale metabolic models that are suitable for metabolic phenotype predictions by using constraint-based flux analysis. We validated gapseq by comparing predictions to experimental data for more than 1, 000 bacterial organisms comprising over 10, 000 phenotypic traits that include enzyme activity, energy sources, fermentation products, and gene essentiality. This large-scale phenotypic trait prediction test showed, that gapseq yields an overall accuracy of 80% and thereby outperforming other commonly used reconstruction tools. Furthermore, we illustrate the application of gapseq-reconstructed models to simulate biochemical interactions between microorganisms in multi-species communities. Altogether, gapseq (https://github.com/jotech/gapseq) is a new method that improves the predictive potential of automated metabolic network reconstructions and further increases their applicability in biotechnological, ecological, and medical research.