Strains belonging to the Pseudomonas protegens phylogenomic subgroup have long been known for their beneficial association with plant roots, notably antagonising soilborne phytopathogens. Interestingly, they can also infect and kill pest insects, emphasising their interest as biocontrol agents. In the present study, we used all available Pseudomonas genomes to reassess the phylogeny of this subgroup. Clustering analysis revealed the presence of 12 distinct species, many of which were previously unknown. The differences between these species also extend to the phenotypic level. Most of the species were able to antagonise two soilborne phytopathogens, Fusarium graminearum and Pythium ultimum, and to kill the plant pest insect Pieris brassicae in feeding and systemic infection assays. However, four strains failed to do so, likely as a consequence of adaptation to particular niches. The absence of the insecticidal Fit toxin explained the non-pathogenic behaviour of the four strains towards Pieris brassicae. Further analyses of the Fit toxin genomic island evidence that the loss of this toxin is related to non-insecticidal niche specialisation. This work expands the knowledge on the growing Pseudomonas protegens subgroup and suggests that loss of phytopathogen inhibition and pest insect killing abilities in some of these bacteria may be linked to species diversification processes involving adaptation to particular niches. Our work sheds light on the important ecological consequences of gain and loss dynamics for functions involved in pathogenic host interactions of environmental bacteria.