The fermentation conditions for the production of validamycin by Streptomyces hygroscopicus var. limoneus No. T-7545 were studied. Validamycins A and B showed no antimicrobial activity on agar media against bacteria, yeasts and fungi, but caused an abnormal branching at the tips of the hyphae of Pellicularia sasakii. Although they were inactive in vitro, validamycins A and B controlled the sheath blight of rice plants and the damping off of cucumber seedlings in green house tests. Validamycin A was effective against the sheath blight at a concentration of 30ppm. Both antibiotics showed low toxicity to plants, fishes and mice. Validamycins A and B are weakly basic, water soluble antibiotics produced by Streptomyces hygroscopicus var. limoneus. Although they showed good activity against the sheath blight of rice plants and the damping off of cucumber seedlings caused by Pellicularia sasakii and Rhizoctonia solani, respectively, the growth of bacteria and fungi including P. sasakii and P. solani were not inhibited by validamycins A and B on agar media in ordinary in vitro tests. However, it was observed that under certain conditions the hyphae of P. sasakii and R. solani were subject to an abnormal branching at the tips and further development was repressed. Using this phenomenon, new assay methods were devised: a dilution assay designated the "dendroidtest method", and a diffusion method called the "reversed layer method". Culture conditions for the production of validamycins and the biological properties of validamycins are reported in the present paper.