A novel small antifungal peptide-producing strain D4 was isolated from the dung of wild plateau yak and identified as Bacillus megaterium. The purification procedure of peptide consisted of acid precipitation, methanol extract and C(18) reverse-phase chromatography. The amino acid composition of peptide YP differed from those of antifungal peptides which have been reported to date. Peptide YP was proved to be a novel small antifungal cyclic peptide. It exhibited strong inhibitory activity against many phytopathogenic fungi and had a wild range of thermo stability and pH stability and was not susceptible to all proteases tested.