A new antibiotic, nematophin, was isolated from strain BC1 of Xenorhabdus nematophilus and detected in all strains of X. nematophilus studied. Its structure is fully established as 3-indoleethyl (3′-methyl-2′-oxo)pentanamide by extensive spectroscopic study. The production of nematophin is affected by the strain type and culture conditions. The compound shows strong in vitro bioactivity against a series of fungal and bacterial species.Key words: nematophin, symbiotic bacteria, Xenorhabdus nematophilus, antibiotic.