There is substantial interest in discovering inhibitors of ergosterol biosynthesis in fungi, since ergosterol is an essential constituent of the fungal cytoplasmic membrane. Such inhibitors as the azole antifungals have been clinically useful1). Using a mutant of Candida tropicalis pK233 strain2), which produced abnormally shaped colonies when exposed to an inhibitor of ergosterol biosynthesis, we have screened microbial fermentations for novel inhibitors to find that an unidentified fungal strain YL-03706F induced the morphological change of colonies in this mutant, but not in the wild type of C. tropicalis. In this report, we describe the fermentation, isolation, structure elucidation, and biological properties.