Milbemycins, produced from Streptomyces hygroscopicus subsp. aureolacrimosus and Streptomyces bingchenggensis, are 16-membered macrolides that share structural similarity with avermectin produced from Streptomyces avermitilis. Milbemycins possess strong acaricidal, insecticidal, and anthelmintic activities but low toxicity. Due to the high commercial value of the milbemycins and increasing resistance to the avermectins and their derivatives, it is imperative to develop an efficient combinatorial biosynthesis system exploiting an overproduction host strain to produce the milbemycins and novel analogs in large quantities. The respective replacement of AveA1 and AveA3 (or module 7 in AveA3) of the avermectin polyketide synthase (PKS) in the avermectin high-producing strain S. avermitilis SA-01 with MilA1 and MilA3 (or module 7 in MilA3) of the milbemycin PKS resulted in the production of milbemycins A3, A4, and D in small amounts and their respective C5-O-methylated congener milbemycins B2, B3, and G as major products with total titers of approximately 292 mg/l. Subsequent inactivation of the C5-O-methyltransferase AveD led to a production of milbemycins A3/A4 (the main components of the commercial product milbemectin) in approximately 225 and 377 mg/l in the flask and 5 l fermenter culture, respectively, along with trace amounts of milbemycin D. We demonstrated that milbemycin biosynthesis can be engineered in the avermectin-producing S. avermitilis by combinatorial biosynthesis with only a slight decrease in its production level. Application of a similar strategy utilizing higher producing industrial strains will provide a more efficient combinatorial biosynthesis system based on S. avermitilis for further enhanced production of the milbemycins and their novel analogs with improved insecticidal potential.