Echinoderms exhibit several fascinating evolutionary innovations that are rarely seen in the animal kingdom, but how these animals attained such features is not well understood. Here we report the sequencing and analysis of the genome and extensive transcriptomes of the sea cucumber Apostichopus japonicus, a species from a special echinoderm group with extraordinary potential for saponin synthesis, aestivation and organ regeneration. The sea cucumber does not possess a reorganized Hox cluster as previously assumed for all echinoderms, and the spatial expression of Hox7 and Hox11/13b potentially guides the embryo-to-larva axial transformation. Contrary to the typical production of lanosterol in animal cholesterol synthesis, the oxidosqualene cyclase of sea cucumber produces parkeol for saponin synthesis and has “plant-like” motifs suggestive of convergent evolution. The transcriptional factors Klf2 and Egr1 are identified as key regulators of aestivation, probably exerting their effects through a clock gene-controlled process. Intestinal hypometabolism during aestivation is driven by the DNA hypermethylation of various metabolic gene pathways, whereas the transcriptional network of intestine regeneration involves diverse signaling pathways, including Wnt, Hippo and FGF. Decoding the sea cucumber genome provides a new avenue for an in-depth understanding of the extraordinary features of sea cucumbers and other echinoderms.