A 7.6kb PstI-KpnI DNA fragment including a sequence highly similar to kasugamycin acetyltransferase gene (kac) was isolated from Streptomyces kasugaensis M338-M1 and sequenced. Nine open reading frames (ORFs), designated as ORF A, B, C, D, E, F, G, H and I, were recognized in this region, although ORF A was incomplete. ORF G runs in the opposite direction to the others. The amino acid sequence deduced from ORF H showed 98% similarity to that of the kasugamycin acetyltransferase from S. kasugaensis MB273-C4, another kasugamycin (KSM) producer. Transformation of E. coli JM109 with ORF H made the strain highly resistant to KSM. The deduced amino acid sequences of the ORF A, C and D products were similar, respectively, to glucosyltransferase I from E. coli (26%), beta-alanine: pyruvate transaminase from Pseudomonas putida (32%) and dTDP-D-glucose 4,6-dehydratase (StrE) from Streptomyces griseus (37%). The strE-like ORF (ORF D) seems to be the gene responsible for formation of the 6-deoxy structure of the kasugamine moiety. ORF A and ORF C are also likely to have roles in KSM biosynthesis. Taken together, our analyses strongly suggest that this DNA region includes at least a part of the gene cluster of KSM biosynthesis.