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Paenibacillus terrae NK3-4 is a plant growth-promoting rhizobacterium that may be useful for controlling plant diseases. We conducted a genomic analysis and identified the genes mediating antimicrobial functions. Additionally, an extracellular antifungal protein component was isolated and identified. The draft genome sequence was assembled into 54 contigs, with 5 458 568 bp and a G+C content of 47%. Moreover, 4 690 015 bp encoded 5090 proteins, 7 rRNAs, and 54 tRNAs. Forty-four genes involved in antimicrobial functions were detected. They mainly encode 19 non-ribosomal peptide synthetases (NRPSs); one polyketide synthase/NRPSs hybrid enzyme; four Zn-dependent metalloproteases; three antilisterial bacteriocin subtilosin biosynthesis proteins (AlbA); four serine proteases; five pectate lyases; three beta-glucanases; and four 1,4-beta-xylanases. These include four novel NRPSs that have not been found in any species of Paenibacillus. Furthermore, five proteins exhibiting antifungal activity were identified from the antifungal extracellular protein component based on MS/MS and the strain NK3-4 predicted protein library. On the basis of these features, we propose that strain NK3-4 represents a promising biocontrol agent for protecting plant from diseases. The draft genome sequence described herein may provide the genetic basis for the characterization of the molecular mechanisms underlying the biocontrol functions. It may also facilitate the development of rational strategies for improving the strain.