The marine annelid Osedax has evolved a unique heterotrophic symbiosis that allows it to feed exclusively on sunken bones. Yet, the genetic and physiological principles sustaining this symbiosis are poorly understood. Here we show that Osedax frankpressi has a small, AT-rich genome shaped by extensive gene loss. While the Oceanospirillales endosymbiont of Osedax is enriched in genes for carbohydrate and nitrogen metabolism, O. frankpressi has undergone genetic changes to accommodate bone digestion, including the expansion of matrix metalloproteases, and a loss of pathways to synthesize amino acids that are abundant in collagen. Unlike other symbioses, however, innate immunity genes required to acquire and control the endosymbionts are reduced in O. frankpressi. These findings reveal Osedax has evolved an alternative genomic toolkit to bacterial symbiosis where host-symbiont co-dependence has favoured genome simplicity in the host to exploit the nutritionally unbalanced diet of bones.