Compounds possessing a C-P or C-P-C bond are very rare among natural products and their formation mechanisms remain to be investigated in detail. Bialaphos, a tripeptide (phosphinothricylalanylalanine) produced by Streptomyces hygroscopicus SF-1293 and S. viridochromogenes with a C-P-C bond in its phosphinothricin moiety and used as a herbicide, was studied for its biosynthetic mechanism. When S. hygroscopicus was cultivated without Co++, two new metabolites (MP-101 and MP-102) containing a H-P-C bond (never before found in nature) accumulated in the fermentation broth, detected by 31P NMR (characteristic chemical shifts and large JH-P coupling constants indicating H-P linkage). MP-101 (C5H10O4NP) was isolated via Dowex columns, identified as 2-amino-4-phosphonobutyric acid with a H-P(O)OH-C structure (by FD-MS, 1H NMR, spin decoupling, and comparison to known compounds). MP-102 (C12H20O6N3P) was a tripeptide of MP-101 and two L-alanine residues (confirmed by acid hydrolysis, dansylation, and 1H NMR comparison to bialaphos). A bialaphos biosynthetic mutant (NTG-213) quantitatively converted both compounds to bialaphos, showing H-P bond formation is prerequisite for phosphorous methylation in C-P-C bond formation. MP-101 inhibited producer growth at 10 µg/ml but neither compound had other tested bioactivity. We hypothesize bialaphos biosynthesis involves reduction of a phosphate ester (e.g., phosphoenolpyruvate) to a phosphite ester, which rearranges to a phosphinic acid intermediate for MP-101/MP-102 formation.