A novel heterotrophic aerobic denitrifying Pseudomonas hunanensis strain DC-2 was screened from the sediments of Lake Dianchi and identified with high nitrification/denitrification ability. Within 30 h, the removal efficiency of ammonium-N and nitrate-N could reach 98.8% and 88.4%, respectively. The results of the single-factor experiments indicated that strain DC-2 exhibited excellent denitrification ability under the conditions of using sodium citrate as the nitrogen source, with an initial pH of 7, a C/N ratio of 10, and a temperature of 30 °C. Nitrogen balance experiments suggested that this strain removed N mainly via assimilation. Moreover, the N removal pathway was explored by genome and enzymatic assays, and a complex nitrogen metabolism pathway was established, including heterotrophic nitrification-aerobic denitrification (HN-AD), assimilatory reduction of nitrate (ANRA), and ammonia assimilation. Additionally, strain DC-2 was immobilized into particles for denitrification, demonstrating excellent efficacy in continuous total nitrogen removal (84.8% for TN). Hence, strain DC-2 demonstrated significant potential in treating real aquaculture wastewater.