Paulownias are among the fastest growing trees in the world, but they often suffer tremendous loss of wood production due to infection by Paulownia witches' broom (PaWB) phytoplasmas. In this study, we have sequenced and assembled a high-quality nuclear genome of Paulownia fortunei, a commonly cultivated paulownia species. The assembled genome of P. fortunei is 511.6 Mb in size, with 93.2% of its sequences anchored to 20 pseudo-chromosomes, and it contains 31 985 protein-coding genes. Phylogenomic analyses show that the family Paulowniaceae is sister to a clade composed of Phrymaceae and Orobanchaceae. Higher photosynthetic efficiency is achieved by integrating C3 photosynthesis and the crassulacean acid metabolism pathway, which may contribute to the extremely fast growth habit of paulownia trees. Comparative transcriptome analyses reveal modules related to cambial growth and development, photosynthesis, and defense responses. Additional genome sequencing of PaWB phytoplasma, combined with functional analyses, indicates that the effector PaWB-SAP54 interacts directly with Paulownia PfSPLa, which in turn causes the degradation of PfSPLa by the ubiquitin-mediated pathway and leads to the formation of witches' broom. Taken together, these results provide significant insights into the biology of paulownias and the regulatory mechanism for the formation of PaWB.