The biosynthetic gene cluster for the dienoyltetramic acid streptolydigin was identified and characterized from the producer organism Streptomyces lydicus NRRL2433. Sequence analysis of an 80.8 kb DNA region revealed the presence of 38 ORFs, 29 of which are probably involved in streptolydigin biosynthesis and would code for all activities required for its biosynthesis. Six insertional inactivation mutants were generated in the sequenced region to prove its involvement in streptolydigin biosynthesis, to define the boundaries of the cluster, to functionally characterize some genes, and to generate novel derivatives. A model for streptolydigin biosynthesis is proposed that includes a probable domain skipping in the streptolydigin PKS and the participation of a free-standing adenylation domain protein. Some bioactive derivatives of streptolydigin with altered glycosylation pattern have been produced by combinatorial biosynthesis showing a certain degree of flexibility of the L-rhodinosyl transferase SlgG for the recognition of 2,3,6-trideoxyhexoses and 2,6-dideoxyhexoses, both in D- and L-configuration.