Many fungi are opportunistic pathogens that threat human health and impair agricultural productivity. Recently, we isolated an antifungal compound, HSAF (dihydromaltophilin), from the biocontrol agent Lysobacter enzymogenes C3, which is a bacterium effective in protecting crops from fungal diseases. HSAF exhibits activity against a wide range of fungi and shows a novel mode of action through disrupting the polarized growth of filamentous fungi. The chemical structure of HSAF is a tetramic acid-containing macrolactam fused to a 5,5,6-tricyclic system. These structural features are also found in several biologically active marine natural products, such as discodermide, cylindramide, and alteramide. Sophisticated and complex chemical syntheses have been developed for some of the products. However, the biosynthesis has not been investigated due to the difficulties in access to these marine products and their invertebrate/microbial producers. HSAF is an ideal system to dissect the biosynthetic mechanism because it is produced by a terrestrial bacterium that is easy to grow and maintain and amendable for genetic manipulations. We have sequenced a part of the HSAF biosynthetic gene cluster, including genes for a hybrid PKS-NRPS, a sterol desaturase, an arginase, and a ferredoxin reductase. We have also expressed some of the catalytic domains of the PKS-NRPS for activity tests. The results showed that the adenylation domain specifically activates L-ornithine and, to a less extent, L-arginine. We are currently using the expressed enzymes to figure out the mechanism for the tetramic acid formation. In addition, we are also undertaking domain genetic manipulations to biosynthesize new HSAF analogs.