Powdery mildew poses severe threats to wheat production. The most sustainable way to control this disease is through planting cultivars with resistance genes. We report the map-based cloning of the powdery mildew resistance allele Pm5e from Chinese wheat landrace. We applied a two-step bulked segregant RNA sequencing (BSR-Seq) approach in developing tightly linked or co-segregated markers to Pm5e. The first BSR-Seq used phenotypically-contrasting bulks of a recombinant inbred lines (RIL) to identify Pm5e-linked markers. The second BSR-Seq utilized bulks of genetic recombinants screened from a fine mapping population to precisely quantify associated genomic variations in the mapping interval, and identified the Pm5e candidates. The function of Pm5e was validated by transgenic assay, loss-of-function mutants and haplotype association analysis. Pm5e encodes a nucleotide-binding domain leucine-rich-repeat-containing protein (NLR). A rare nonsynonymous single nucleotide variant (SNV), endemic to wheat landraces of Shaanxi province of China, in the C-terminus of NLR is responsible for the gain of powdery mildew resistance function of Pm5e. Results from this study demonstrated the value of landraces in discovering useful genes for modern wheat breeding. The key SNV associated with powdery mildew resistance will be useful for marker-assisted selection of Pm5e in wheat breeding program.