The role of Streptomyces sp. (BTL7) in synthesis of antibacterial agents reported from the marine sponge Dendrilla nigra was evaluated. Selective isolation of actinomycetes was performed on the newly developed selective media, Sponge Agar (SA) 1 and SA 2. The growth rate and antibiotic production were increased on the media supplemented with sponge extract. The chosen isolate BTL7 showed inhibitory interaction with Micrococcus luteus and the extracellular products contained potent antibacterial agents. The minimum inhibitory concentration of BTL7 against M. luteus was 44 microg protein/ml and the minimum bactericidal concentration was 88 microg protein/ml. Peak antibacterial activity was observed at 72 h in batch culture. Based on the findings, it could be inferred that bacterial endosymbionts sponges could form a reliable source for bioprospecting of next generation pharmaceutical agents.