In 1996 a common-source outbreak of severe soft tissue and bloodstream infections erupted among Israeli fish farmers and fish consumers due to changes in fish marketing policies. The causative pathogen was a new strain of Vibrio vulnificus, named biotype 3, which displayed a unique biochemical and genotypic profile. Initial observations suggested that the pathogen erupted as a result of genetic recombination between two distinct populations. We applied a whole genome shotgun sequencing approach using several V. vulnificus strains from Israel in order to study the pan genome of V. vulnificus and determine the phylogenetic relationship of biotype 3 with existing populations. The core genome of V. vulnificus based on 16 draft and complete genomes consisted of 3068 genes, representing between 59 and 78% of the whole genome of 16 strains. The accessory genome varied in size from 781 to 2044 kbp. Phylogenetic analysis based on whole, core, and accessory genomes displayed similar clustering patterns with two main clusters, clinical (C) and environmental (E), all biotype 3 strains formed a distinct group within the E cluster. Annotation of accessory genomic regions found in biotype 3 strains and absent from the core genome yielded 1732 genes, of which the vast majority encoded hypothetical proteins, phage-related proteins, and mobile element proteins. A total of 1916 proteins (including 713 hypothetical proteins) were present in all human pathogenic strains (both biotype 3 and non-biotype 3) and absent from the environmental strains. Clustering analysis of the non-hypothetical proteins revealed 148 protein clusters shared by all human pathogenic strains; these included transcriptional regulators, arylsulfatases, methyl-accepting chemotaxis proteins, acetyltransferases, GGDEF family proteins, transposases, type IV secretory system (T4SS) proteins, and integrases. Our study showed that V. vulnificus biotype 3 evolved from environmental populations and formed a genetically distinct group within the E-cluster. The unique epidemiological circumstances facilitated disease outbreak and brought this genotype to the attention of the scientific community.