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Duddingtonia flagrans is a nematode-trapping fungus that is widely used to control parasitic nematodes in livestock. To investigate the features and advantages of D. flagrans for nematode control at the molecular level, the genome and transcriptome of D. flagrans were sequenced and studied through a comparative analysis. The genome of D. flagrans had a size of 36.3 Mb and contained a higher ratio of repetitive sequences, which revealed its slow evolution. Comparative genomics analysis revealed the genome of D. flagrans to be relatively conserved compared to eight sequenced fungal genomes. Genes related to nematode trapping, virulence and pathogenicity were expanded in the D. flagrans genome, such as PHI genes, cytochrome P450 genes and various secretory protein genes. Remarkably, D. flagrans possessed a significant variety and abundance of putative proteases, while carbohydrate degradation-related genes were rare. Based on transcriptional profiling of different nematode trapping stages (0 h, 12 h and 48 h), the genes for some crucial secreted enzymes were up-regulated during nematode trapping process, including Zn(2)-C6-type transcription factor, chitinases, serine proteases and lectin-coding genes. The draft genome and transcriptome of D. flagrans provide evidence for the high pathogenicity and weaker saprophytic capability of this organism and constitute a theoretical foundation for the clinical use of D. flagrans as a biocontrol agent against parasitic nematodes.