Actinobacteria produce antibacterial and antifungal specialized metabolites. Many insects harbour actinobacteria on their bodies or in their nests and use these metabolites for protection. However, some actinobacteria produce metabolites that are toxic to insects and the evolutionary relevance of this toxicity is unknown. Here we explore chemical interactions between streptomycetes and the fruit fly Drosophila melanogaster. We find that many streptomycetes produce specialized metabolites that have potent larvicidal effects against the fly; larvae that ingest spores of these species die. The mechanism of toxicity is specific to the bacterium's chemical arsenal: cosmomycin D producing bacteria induce a cell death-like response in the larval digestive tract; avermectin producing bacteria induce paralysis. Furthermore, low concentrations of volatile terpenes like 2-methylisoborneol that are produced by streptomycetes attract fruit flies such that they preferentially deposit their eggs on contaminated food sources. The resulting larvae are killed during growth and development. The phenomenon of volatile-mediated attraction and specialized metabolite toxicity suggests that some streptomycetes pose an evolutionary risk to insects in nature.