The fermentation conditions for the production of validamycin by Streptomyces hygroscopicus var. limoneus No. T-7545 were studied. Validamycins A and B are weakly basic, water soluble antibiotics produced by Streptomyces hygroscopicus var. limoneus. They showed no antimicrobial activity on agar media against bacteria, yeasts and fungi, but under certain conditions caused abnormal branching at the tips of the hyphae of Pellicularia sasakii and Rhizoctonia solani, repressing further development. Although inactive in vitro, validamycins A and B controlled the sheath blight of rice plants (caused by P. sasakii) and the damping off of cucumber seedlings (caused by R. solani) in green house tests; Validamycin A was effective against the sheath blight at 30ppm. Both antibiotics showed low toxicity to plants, fishes and mice. Using the abnormal hyphal branching phenomenon, new assay methods were devised: a dilution assay designated the "dendroid test method" and a diffusion method called the "reversed layer method". Culture conditions for the production of validamycins and their biological properties are reported in the present paper.