Nitrite-oxidizing bacteria of the genus Nitrospira are ubiquitous in natural ecosystems and also in wastewater treatment plants. Nitrospira are members of a distinct phylum, not closely related to other nitrifiers, and no genomic sequences from this genus have been available so far. Here we applied an environmental genomics approach to sequence and assemble a 137 kbp-long genome fragment of 'Candidatus Nitrospira defluvii', which had been enriched from activated sludge and belongs to Nitrospira sublineage I without isolated representatives. The annotation of this contig, which carried the 16S rRNA gene of N. defluvii, offered first insight into the genome of Nitrospira. Surprisingly, we found a gene similar to genes encoding chlorite dismutase (CLD), an enzyme degrading chlorite (ClO(2)(-)) to Cl(-) and O(2). To date, CLDs with high catalytic activity have been found only in perchlorate- and chlorate-reducing bacteria but not in nitrifiers. Heterologous expression in E. coli followed by enzymatic tests confirmed that this gene of Nitrospira encodes a highly active CLD, which is also expressed in situ by Nitrospira, indicating that this nitrite oxidizer might be involved in the bioremediation of perchlorate and chlorite. Phylogenetic analyses showed that CLD and related proteins are widely distributed among the Bacteria and Archaea, and indicated that this enzyme family appeared relatively early in evolution, has been subject to functional diversification and might play yet unknown roles in microbial metabolism.