Streptomyces avermitilis, an industrial organism responsible for the production of the anthelminthic avermectins, harbors a 13.4 kb gene cluster containing 13 unidirectionally transcribed open reading frames corresponding to the apparent biosynthetic operon for the sesquiterpene antibiotic pentalenolactone. The advanced intermediate pentalenolactone F, along with the shunt metabolite pentalenic acid, could be isolated from cultures of S. avermitilis, thereby establishing that the pentalenolactone biosynthetic pathway is functional in S. avermitilis. Deletion of the entire 13.4 kb cluster from S. avermitilis abolished formation of pentalenolactone metabolites, while transfer of the intact cluster to the pentalenolactone nonproducer Streptomyces lividans 1326 resulted in production of pentalenic acid. Direct evidence for the biochemical function of the individual biosynthetic genes came from expression of the ptlA gene (SAV2998) in Escherichia coli. Assay of the resultant protein established that PtlA is a pentalenene synthase, catalyzing the cyclization of farnesyl diphosphate to pentalenene, the parent hydrocarbon of the pentalenolactone family of metabolites. The most upstream gene in the cluster, gap1 (SAV2990), was shown to correspond to the pentalenolactone resistance gene, based on expression in E. coli and demonstration that the resulting glyceraldehyde-3-phosphate dehydrogenase, the normal target of pentalenolactone, was insensitive to the antibiotic. Furthermore, a second GAPDH isozyme (gap2, SAV6296) has been expressed in E. coli and shown to be inactivated by pentalenolactone.