<jats:title>Abstract</jats:title><jats:sec><jats:title>Background</jats:title><jats:p>The antifungal therapy caspofungin is a semi-synthetic derivative of pneumocandin B<jats:sub>0</jats:sub>, a lipohexapeptide produced by the fungus<jats:italic>Glarea lozoyensis</jats:italic>, and was the first member of the echinocandin class approved for human therapy. The nonribosomal peptide synthetase (NRPS)-polyketide synthases (PKS) gene cluster responsible for pneumocandin biosynthesis from<jats:italic>G. lozoyensis</jats:italic>has not been elucidated to date. In this study, we report the elucidation of the pneumocandin biosynthetic gene cluster by whole genome sequencing of the<jats:italic>G. lozoyensis</jats:italic>wild-type strain ATCC 20868.</jats:sec><jats:sec><jats:title>Results</jats:title><jats:p>The pneumocandin biosynthetic gene cluster contains a NRPS (GLNRPS4) and a PKS (GLPKS4) arranged in tandem, two cytochrome P450 monooxygenases, seven other modifying enzymes, and genes for L-homotyrosine biosynthesis, a component of the peptide core. Thus, the pneumocandin biosynthetic gene cluster is significantly more autonomous and organized than that of the recently characterized echinocandin B gene cluster. Disruption mutants of GLNRPS4 and GLPKS4 no longer produced the pneumocandins (A<jats:sub>0</jats:sub>and B<jats:sub>0</jats:sub>), and the<jats:italic>Δglnrps4</jats:italic>and<jats:italic>Δglpks4</jats:italic>mutants lost antifungal activity against the human pathogenic fungus<jats:italic>Candida albicans</jats:italic>. In addition to pneumocandins, the<jats:italic>G. lozoyensis</jats:italic>genome encodes a rich repertoire of natural product-encoding genes including 24 PKSs, six NRPSs, five PKS-NRPS hybrids, two dimethylallyl tryptophan synthases, and 14 terpene synthases.</jats:sec><jats:sec><jats:title>Conclusions</jats:title><jats:p>Characterization of the gene cluster provides a blueprint for engineering new pneumocandin derivatives with improved pharmacological properties. Whole genome estimation of the secondary metabolite-encoding genes from<jats:italic>G. lozoyensis</jats:italic>provides yet another example of the huge potential for drug discovery from natural products from the fungal kingdom.</jats:sec>