Two novel antifungals SCH 643432 (1), and 2, were isolated from the fermentation broth of a fungus taxonomically classified as a Paecilomyces varioti. These compounds were separated from the fermentation broth filtrate by adsorption on a macroreticular resin XAD-16 (Amberlite). Purification and separation of the individual compounds were achieved by trituration of the extract with dichloromethane followed by preparative HPLC using reverse phase columns. Extensive FAB (Fast Atom Bombardment) and ESI (Electro Spray) mass spectrometric studies using fragmentation of various daughter ions, NMR experiments and degradative studies helped in elucidating the structure of compound 1. Compound 2 is an isomer of SCH 643432 (1). They were identified as straight chains peptides containing several amino acids such as alanine, aminoisobutyric acid, proline, leucine, glycine and arginine. The N-terminal is terminated in a previously identified beta-keto acid, 2-methyl 3-oxo tetradecanoic acid (MOTDA). Both compounds were active against Candida albicans, other Candidas, dermatophytes and Aspergillus (Geometric Mean MIC's 4.00, 2.59, 3.56, 11.31 and 4.49, 4.00, 5.66, 16.0 microg/ml, respectively for 1 and 2).