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The Asian rice gall midge (Orseolia oryzae) is a major pest responsible for immense loss in rice productivity. Currently, very little knowledge exists with regard to this insect at the molecular level. The present study was initiated with the aim of developing molecular resources as well as identifying alterations at the transcriptome level in the gall midge maggots that are in a compatible (SH) or in an incompatible interaction (RH) with their rice host. Roche 454 pyrosequencing strategy was used to develop both transcriptomics and genomics resources that led to the identification of 79,028 and 85,395 EST sequences from gall midge biotype 4 (GMB4) maggots feeding on a susceptible and resistant rice variety, TN1 (SH) and Suraksha (RH), respectively. Comparative transcriptome analysis of the maggots in SH and RH revealed over-representation of transcripts from proteolysis and protein phosphorylation in maggots from RH. In contrast, over-representation of transcripts for translation, regulation of transcription and transcripts involved in electron transport chain were observed in maggots from SH. This investigation, besides unveiling various mechanisms underlying insect-plant interactions, will also lead to a better understanding of strategies adopted by insects in general, and the Asian rice gall midge in particular, to overcome host defense.