Orthonectida is a small, rare, and in many aspects enigmatic group of organisms with a unique life cycle and a highly simplified adult free-living stage parasitizing various marine invertebrates [1, 2]. Phylogenetic relationships of Orthonectida have remained controversial for a long time. According to recent data, they are close to Annelida, specifically to Clitellata [3–5]. Several studies have shown that parasitism can not only lead to a dramatic reduction of the body plan and morphological structures but also affect organisms at the genomic level [6, 7]. Comparative studies of parasites and closely related non-parasitic species could clarify the genome reduction degree and evolution of parasitism. Here, we report on the morphology, genome structure, and content of the smallest known Orthonectida species Intoshia variabili, inhabiting the flatworm Graffiellus croceus. This orthonectid with an extremely simplified nervous system demonstrates the smallest known genome (15.3 Mbp) and one of the lowest reported so far gene numbers (5,120 protein-coding genes) among metazoans. The genome is extremely compact, due to a significant reduction of gene number, intergenic regions, intron length, and repetitive elements. The small genome size is probably a result of extreme genome reduction due to their parasitic lifestyle, as well as of simplification and miniaturization of the free-living stages. Our data could provide further insights into the evolution of parasitism and could help to define a minimal bilaterian gene set.