Background: The presence of Bacillus in very diverse environments reflects the versatile metabolic capabilities of a widely distributed genus. Traditional phylogenetic analysis based on limited gene sampling is not adequate for resolving the genus evolutionary relationships. By distinguishing between core and pan-genome, we determined the evolutionary and functional relationships of known Bacillus.Results: Our analysis is based upon twenty complete and draft Bacillus genomes, including a newly sequenced Bacillus isolate from an aquatic environment that we report for the first time here. Using a core genome, we were able to determine the phylogeny of known Bacilli, including aquatic strains whose position in the phylogenetic tree could not be unambiguously determined in the past. Using the pan-genome from the sequenced Bacillus, we identified functional differences, such as carbohydrate utilization and genes involved in signal transduction, which distinguished the taxonomic groups. We also assessed the genetic architecture of the defining traits of Bacillus, such as sporulation and competence, and showed that less than one third of the B. subtilis genes are conserved across other Bacilli. Most variation was shown to occur in genes that are needed to respond to environmental cues, suggesting that Bacilli have genetically specialized to allow for the occupation of diverse habitats and niches.Conclusions: The aquatic Bacilli are defined here for the first time as a group through the phylogenetic analysis of 814 genes that comprise the core genome. Our data distinguished between genomic components, especially core vs. pan-genome to provide insight into phylogeny and function that would otherwise be difficult to achieve. A phylogeny may mask the diversity of functions, which we tried to uncover in our approach. The diversity of sporulation and competence genes across the Bacilli was unexpected based on previous studies of the B. subtilis model alone. The challenge of uncovering the novelties and variations among genes of the non-subtilis groups still remains. This task will be best accomplished by directing efforts toward understanding phylogenetic groups with similar ecological niches.