A precursor of biphenomycin A in mixed culture of Streptomyces griseorubiginosus No. 43708 with Pseudomonas maltophilia No. 1928 was isolated and characterized. The precursor, designated biphenomycin C, was determined to be a peptide composed of biphenomycin A and an arginylserine residue based on chemical (acid hydrolysis yielding arginine and serine) and spectroscopic (1H/13C NMR) evidence. Previously, we reported the isolation and structure determination of biphenomycins A and B, and that biphenomycin A production by S. griseorubiginosus No. 43708 was stimulated by mixed culture with P. maltophilia No. 1928, hypothesizing that strain No. 43708 produced a precursor of biphenomycin A which was enzymatically converted to biphenomycin A by strain No. 1928. In this paper, we describe the isolation (via Diaion HP-20, Amberlite IRC50, DEAE-Sephadex A-25, and HPLC purification) and structural elucidation of this precursor. Biphenomycin C exhibits activity against Gram-positive bacteria but with lower antibacterial activity compared to biphenomycin A. Enzyme reaction experiments using cell-free extracts of P. maltophilia No. 1928 confirmed the conversion of biphenomycin C to biphenomycin A and arginylserine, and the linkage position of biphenomycin A and the arginylserine residue, as well as the absolute configuration of arginine and serine, were established by synthesis.