Filamentous cyanobacteria of the genus Lyngbya are important contributors to coral reef ecosystems, occasionally forming dominant cover and impacting the health of many other co-occurring organisms. Moreover, they are extraordinarily rich sources of bioactive secondary metabolites, with 35% of all reported cyanobacterial natural products deriving from this single pantropical genus. However, the true natural product potential and life strategies of Lyngbya strains are poorly understood because of phylogenetic ambiguity, lack of genomic information, and their close associations with heterotrophic bacteria and other cyanobacteria. To gauge the natural product potential of Lyngbya and gain insights into potential microbial interactions, we sequenced the genome of Lyngbya majuscula 3L, a Caribbean strain that produces the tubulin polymerization inhibitor curacin A and the molluscicide barbamide, using a combination of Sanger and 454 sequencing approaches. Whereas ∼ 293,000 nucleotides of the draft genome are putatively dedicated to secondary metabolism, this is far too few to encode a large suite of Lyngbya metabolites, suggesting Lyngbya metabolites are strain specific and may be useful in species delineation. Our analysis revealed a complex gene regulatory network, including a large number of sigma factors and other regulatory proteins, indicating an enhanced ability for environmental adaptation or microbial associations. Although Lyngbya species are reported to fix nitrogen, nitrogenase genes were not found in the genome or by PCR of genomic DNA. Subsequent growth experiments confirmed that L. majuscula 3L is unable to fix atmospheric nitrogen. These unanticipated life history characteristics challenge current views of the genus Lyngbya.