Here we report a newly identified ‘Chalky back’ phenomenon in banana prawns (Fenneropenaeus merguiensis) farmed in North Queensland, Australia. This was characterized by localized white discoloured segmentation of the cervical groove, moreover, after cooking the prawns exploded, making them unfit for commercial sale. Histological examination revealed breakdown of gut and abdominal muscle tissue in some moribund specimens. We selectively isolated Vibrio spp., which are known prawn pathogens, from healthy and Chalky back specimens. Isolated bacteria were identified, typed and tested for the presence of eight virulence genes (VGs), biofilm formation, adherence and cytotoxicity to fish cells. In all, 32 isolates were recovered and identified as Vibrio harveyi, V. owensii, V. sinaloensis-like, V. campbellii, V. shilonii, Vibrio sp. and Photobacterium damselae using 16S rRNA gene sequencing. All V. harveyi carried VGs coding for haemolysin, toxR and flagella; formed biofilm; and adhered to both cell lines. This was similar to the V. sinaloensis-like strains that were only isolated from Chalky back specimens. Our data suggest that Vibrio spp. may play a role in the pathogenesis of Chalky back. This study is the first report of Chalky back phenomenon in farmed banana prawns that needs to be closely monitored by the industry.