Background: There is growing interest in odonates (damselflies and dragonflies) as model organisms in ecology and evolutionary biology but the development of genomic resources has been slow. So far only one draft genome (Ladona fulva) and one transcriptome assembly (Enallagma hageni) have been published. Odonates have some of the most advanced visual systems among insects and several species are colour polymorphic, and genomic and transcriptomic data would allow studying the genomic architecture of these interesting traits and make detailed comparative studies between related species possible. Here, we present a comprehensive de novo transcriptome assembly for the blue-tailed damselfly Ischnura elegans (Odonata: Coenagrionidae) built from short-read RNA-seq data. The transcriptome analysis in this paper provides a first step towards identifying genes and pathways underlying the visual and colour systems in this insect group. Results: Illumina RNA sequencing performed on tissues from the head, thorax and abdomen generated 428,744,100 paired-ends reads amounting to 110 Gb of sequence data, which was assembled de novo with Trinity. A transcriptome was produced after filtering and quality checking yielding a final set of 60,232 high quality transcripts for analysis. CEGMA software identified 247 out of 248 ultra-conserved core proteins as 'complete' in the transcriptome assembly, yielding a completeness of 99.6%. BLASTX and InterProScan annotated 55% of the assembled transcripts and showed that the three tissue types differed both qualitatively and quantitatively in I. elegans. Differential expression identified 8,625 transcripts to be differentially expressed in head, thorax and abdomen. Targeted analyses of vision and colour functional pathways identified the presence of four different opsin types and three pigmentation pathways. We also identified transcripts involved in temperature sensitivity, thermoregulation and olfaction. All these traits and their associated transcripts are of considerable ecological and evolutionary interest for this and other insect orders. Conclusions: Our work presents a comprehensive transcriptome resource for the ancient insect order Odonata and provides insight into their biology and physiology. The transcriptomic resource can provide a foundation for future investigations into this diverse group, including the evolution of colour, vision, olfaction and thermal adaptation.