A gene cluster containing the mevalonate pathway genes (open reading frame 2 [ORF2] to ORF7) for the formation of isopentenyl diphosphate and a geranylgeranyl diphosphate (GGDP) synthase gene (ORF1) had previously been cloned from Streptomyces griseolosporeus strain MF730-N6, a diterpenoid antibiotic, terpentecin (TP) producer (Y. Hamano, T. Dairi, M. Yamamoto, T. Kawasaki, K Kaneda, T. Kuzuyama, N. Itoh, and H. Seto, Biosci. Biotech. Biochem. 65:1627-1635, 2001). Sequence analysis in the upstream region of the cluster revealed seven new ORFs, ORF8 to ORF14, which were suggested to encode TP biosynthetic genes. We constructed two mutants, in which ORF11 and ORF12, which encode a protein showing similarities to eukaryotic diterpene cyclases (DCs) and a eubacterial pentalenene synthase, respectively, were inactivated by gene disruptions. The mutants produced no TP, confirming that these cyclase genes are essential for the production of TP. The two cyclase genes were also expressed in Streptomyces lividans together with the GGDP synthase gene under the control of the ermE* constitutive promoter. The transformant produced a novel cyclic diterpenoid, ent-clerod-3,13(16),14-triene (terpentetriene), which has the same basic skeleton as TP. The two enzymes, each of which was overproduced in Escherichia coli and purified to homogeneity, converted GGDP into terpentetriene. To the best of our knowledge, this is the first report of a eubacterial DC.