A new inhibitor of dipeptidyl peptidase II (DPP-II, EC 3.4.14.2), designated as epostatin, was discovered in the fermentation broth of a strain isolated in our institute. The strain has been identified as Streptomyces sp. MJ995-OF5 on the basis of taxonomic studies. Epostatin was obtained as a yellow powder after seqential purification by chromatography on Diaion HP-20, n-butanol extraction, Sephadex LH-20 column chromatography and centrifugal partition chromatography (CPC). Epostatin inhibited DPP-II competitively in a dose dependent manner. The compound was slightly inhibitory against other dipeptidyl peptidases.