Butalactin, [2-(4′,5′-epoxy-hex-2′(E)-en)oyl-2-hydroxy-3-hydroxymethy1-2,3-(Z)-butanolide] is a new antibiotic produced by Streptomyces sp. HIL Y-86,36923. Taxonomically, the producing organism most closely resembles Streptomyces corchorusii. The strain also produces cineromycin B. Though butalactin is structurally related to ′signal molecules′ such as A-factor, the anthracycline inducing factors and the virginiae butanolides, it does not show inducing activity for antibiotic production or aerial mycelium formation in the indicator strain. Butalactin possesses a weak antibiotic activity against Gram-positive and Gram-negative bacteria.