Streptomyces vietnamensis, a recently designated species isolated from tropical forest soil, was found to be a new granaticin producer. The granaticin biosynthetic gene cluster (gra) and flanking genes from S. vietnamensis were cloned and sequenced by a sequential cloning strategy. All biosynthetic genes were found as expected. The high overall homology of the gra cluster from S. vietnamensis to that of Streptomyces violaceoruber Tü22 indicated a recent common ancestor of the two clusters. However, a flanking gene orf35 was missing from the gra cluster of S. vietnamensis, and high frequency of insertions and deletions of short fragment (shorter than 63 bp) were observed throughout the sequenced region compared to that of S. violaceoruber Tü22. These revealed a rapid evolution of the gra cluster and suggested that small insertions and deletions might be one of the basic evolution mechanisms for streptomycete genomes. The phylogenetic incongruence between 16S rDNA and the gra cluster and the scattered distribution of the granaticin producers within Streptomyces implicated horizontal gene transfer (HGT) being involved in the gra cluster dispersion. The remnants of orf35 found in S. vietnamensis present a scenario on how the antibiotic gene clusters evolved after HGT. The contemporary gra cluster residing in S. vietnamensis could be interpreted as a combination of HGT and highly variable vertical transmission.