The rapid increase in bacterial resistance to antibiotics in clinical practice has prompted renewed efforts to discover new types of antibacterial agents.1) In our continuing search for new antibiotics from microorganisms, we examined a number of fungal cultures that were either recently acquired by our laboratory or fermented by unconventional methods.2) The fungus HK1821 was isolated from a decaying piece of wood submerged in the Lam Tsuen River in Tai Po, Hong Kong. Through comparison of the ITS in GenBank, it was found to be highly related to Vaginatispora aquatica.3) In antimicrobial screening, methicillin-resistant Staphylococcus aureus and vancomycin-resistant Enterococcus faecalis were shown to be susceptible to the culture whole broth of HK1821. A new 2-oxo-succinimide polyketide, designated oxasetin (1), was isolated from the fermentation broth and was found to be responsible for the antibacterial activity. In this paper the production, structure, and biological activity of 1 are reported.