<p><i>Stenotrophomonas sepilia</i> SMBL8 is a motile, hemolytic, Gram-negative environmental bacterium isolated from a polluted lake. <i>S. sepilia</i>, a recently identified member of the <i>Stenotrophomonas maltophilia</i> complex, has been reported in both clinical and environmental settings; however, it remains understudied. In this study, we comprehensively investigated the phenotypic and genomic characteristics, emphasising metabolic versatility, antibiotic resistance profile, and pathogenic potential. Antibiotic susceptibility testing revealed sensitivity to trimethoprim/sulphamethoxazole, levofloxacin, and minocycline; resistance and intermediate resistance to β-lactams, aminoglycosides, and chloramphenicol. Whole-genome sequencing revealed a genome length of 4,510,692&#xa0;bp and a G + C content of 66.56%. Functional annotation revealed enrichment and abundant gene distribution in carbohydrate metabolism and binding activity essential for carbohydrate-active metabolism. Subsequent analysis identified a diverse carbohydrate-active enzyme repertoire with potential biotechnological applications as a biocatalyst for substrates such as xylan and chitin. Conversely, further genomic analysis revealed siderophore-encoding genes, multiple putative resistance genes, and mobile genetic elements, including prophages and genomic islands, that encode cascades of putative virulence-associated genes with G + C content distinct from the core genome, suggesting acquisition through horizontal gene transfer. In conclusion, our findings address an existing knowledge gap and highlight the potential dualistic nature of <i>S. sepilia</i> SMBL8, both as a beneficial industrial bacterium and an opportunistic pathogen, facilitated by metabolic versatility and genomic plasticity. Our study also emphasises the critical need for environmental surveillance in anthropogenically disturbed habitats to monitor and mitigate the potential emergence of resistant opportunistic pathogens.</p> Graphical abstract <p></p>