The halophilic γ-proteobacterium Halomonas elongata DSM 2581T thrives at high salinity by synthesizing and accumulating the compatible solute ectoine. Ectoine levels are highly regulated according to external salt levels but the overall picture of its metabolism and control is not well understood. Apart from its critical role in cell adaptation to halophilic environments, ectoine can be used as a stabilizer for enzymes and as a cell protectant in skin and health care applications and is thus produced annually on a scale of tons in an industrial process using H. elongata as producer strain. This paper presents the complete genome sequence of H. elongata (4 061 296 bp) and includes experiments and analysis identifying and characterizing the entire ectoine metabolism, including a newly discovered pathway for ectoine degradation and its cyclic connection to ectoine synthesis. The degradation of ectoine (doe) proceeds via hydrolysis of ectoine (DoeA) to Nα-acetyl-l-2,4-diaminobutyric acid, followed by deacetylation to diaminobutyric acid (DoeB). In H. elongata, diaminobutyric acid can either flow off to aspartate or re-enter the ectoine synthesis pathway, forming a cycle of ectoine synthesis and degradation. Genome comparison revealed that the ectoine degradation pathway exists predominantly in non-halophilic bacteria unable to synthesize ectoine. Based on the resulting genetic and biochemical data, a metabolic flux model of ectoine metabolism was derived that can be used to understand the way H. elongata survives under varying salt stresses and that provides a basis for a model-driven improvement of industrial ectoine production.