Geosmithia morbida is an emerging fungal pathogen which serves as a model for examining the evolutionary processes behind pathogenicity because it is one of two known pathogens within a genus of mostly saprophytic, beetle-associated, fungi. This pathogen causes thousand cankers disease in black walnut trees and is vectored into the host via the walnut twig beetle. G. morbida was first detected in western US and currently threatens the timber industry concentrated in eastern US. We sequenced the genomes of G. morbida in a previous study and two non-pathogenic Geosmithia species in this work and compared these species to other fungal pathogens and nonpathogens to identify genes under positive selection in Geosmithia morbida that may be associated with pathogenicity. Geosmithia morbida possesses one of the smallest genomes among the fungal species observed in this study, and one of the smallest fungal pathogen genomes to date. The enzymatic profile in this pathogen is very similar to its non-pathogenic relatives. Our findings indicate that genome reduction or retention of a smaller genome may be an important adaptative force during the evolution of a specialized lifestyle in fungal species that occupy a specific niche, such as beetle vectored tree pathogens. We also present potential genes under selection in G. morbida that could be important for adaptation to a pathogenic lifestyle.