A sponge-associated actinomycete (strain MCCB267) was isolated from a marine sponge Mycale sp. collected in the Indian Ocean off the Southeast coast of India. Phylogenetic studies of this strain using 16S rRNA gene sequencing showed high sequence similarity to Streptomyces zhaozhouensis. However, strain MCCB267 showed distinct physiological and biochemical characteristic features and was thus designated as S. zhaozhouensis subsp. mycale. subsp. nov. A cytotoxicity-guided fractionation of the crude ethyl acetate extract of strain MCCB267 culture medium yielded four pure compounds belonging to the polycyclic tetramate macrolactam (PTM) family of natural products: ikarugamycin (IK) (1), clifednamide A (CF) (2), 30-oxo-28-N-methylikarugamycin (OI) (3), and 28-N-methylikarugamycin (MI) (4). The four compounds exhibited promising cytotoxic activity against NCI-H460 lung carcinoma cells in vitro, by inducing cell death via apoptosis. Flow cytometric analysis revealed that 1, 3, and 4 induced cell cycle arrest during G1 phase in the NCI-H460 cell line, whereas 2 induced cell arrest in the S phase. A concentration-dependent accumulation of cells in the sub-G1 phase was also detected upon treatment of the cancer cell line with compounds 1-4. The in vitro cytotoxicity studies were supported by molecular docking and molecular dynamic simulation analyses. An in silico study revealed that the PTMs can bind to the minor groove of DNA and subsequently induce the apoptotic stimuli leading to cell death. The characterization of the isolated actinomycete, the study of the mode of action of the four PTMs, 1-4, and the molecular docking and molecular dynamic simulations analyses are herein described.