Xylose is described as a component of bacterial exopolysaccharides in only a limited number of bacterial strains. A bacterial strain, Paenibacillus elgii, B69 was shown to be efficient in producing a xylose-containing exopolysaccharide. Sequence analysis was performed to identify the genes encoding the uridine diphosphate (UDP)-glucuronic acid decarboxylase required for the synthesis of UDP-xylose, the precursor of the exopolysaccharide. Two sequences, designated as Peuxs1 and Peuxs2, were found as the candidate genes for such enzymes. The activities of the UDP-glucuronic acid decarboxylases were proven by heterologous expression and real-time nuclear magnetic resonance analysis. The intracellular activity and effect of these genes on the synthesis of exopolysaccharide were further investigated by developing a thymidylate synthase based knockout system. This system was used to substitute the conventional antibiotic resistance gene system in P. elgii, a natural multi-antibiotic resistant strain. Results of intracellular nucleotide sugar analysis showed that the intracellular UDP-xylose and UDP-glucuronic acid levels were affected in Peuxs1 or Peuxs2 knockout strains. The knockout of either Peuxs1 or Peuxs2 reduced the polysaccharide production and changed the monosaccharide ratio. No polysaccharide was found in the Peuxs1/Peuxs2 double knockout strain. Our results show that P. elgii can be efficient in forming UDP-xylose, which is then used for the synthesis of xylose-containing exopolysaccharide.