Labrys sp. KNU-23 is a Gram-negative, aerobic, rod-shaped, tryptophan-producing, urea-decomposing bacterium that was isolated from ginseng soil in Bonghwa-gun, Republic of Korea. This study reports the complete genome sequence of strain KNU-23. The complete genome comprises two circular chromosomes of 5,388,854 bp and 2,162,438 bp with a GC content of 64 and 62.1%, respectively. The whole genome was predicted to have 6,868 protein coding genes. In addition, ureadecomposing and tryptophan-producing genes that are associated with plant growth-promoting activity were identified. Therefore, Labrys sp. KNU-23 is likely to be an agriculturally useful strain.