Xenocoumacin 1 (Xcn1) and xenocoumacin 2 (Xcn2) are the major antimicrobial compounds produced by Xenorhabdus nematophila. To study the role of Xcn1 and Xcn2 in the life cycle of X. nematophila the 14 gene cluster (xcnA-N) required for their synthesis was identified. Overlap RT-PCR analysis identified six major xcn transcripts. Individual inactivation of the non-ribosomal peptide synthetase genes, xcnA and xcnK, and polyketide synthetase genes, xcnF, xcnH and xcnL, eliminated Xcn1 production. Xcn1 levels and expression of xcnA-L were increased in an ompR strain while Xcn2 levels and xcnMN expression were reduced. Xcn1 production was also increased in a strain lacking acetyl-phosphate that can donate phosphate groups to OmpR. Together these findings suggest that OmpR-phosphate negatively regulates xcnA-L gene expression while positively regulating xcnMN expression. HPLC-MS analysis revealed that Xcn1 was produced first and was subsequently converted to Xcn2. Inactivation of xcnM and xcnN eliminated conversion of Xcn1 to Xcn2 resulting in elevated Xcn1 production. The viability of the xcnM strain was reduced 20-fold relative to the wild-type strain supporting the idea that conversion of Xcn1 to Xcn2 provides a mechanism to avoid self-toxicity. Interestingly, inactivation of ompR enhanced cell viability during prolonged culturing.