Incubation of 1-deoxy-11-oxopentalenic acid (12) with recombinant PtlE protein from Streptomyces avermitilis in the presence of NADPH and catalytic FAD gave the Baeyer-Villiger oxidation product, the previously unknown compound neopentalenolactone D (13), representing a new branch of the pentalenolactone biosynthetic pathway. The structure and stereochemistry of the derived neopentalenolactone D methyl ester (13-Me) were fully assigned by a combination of GC-MS and NMR analysis and confirmed by X-ray crystallography. Neopentalenolactone D (13) was also isolated from engineered cultures of S. avermitilis from which the ptlD gene within the 13.4-kb (neo)-ptl biosynthetic gene cluster had been deleted. The DeltaptlEDeltaptlD double deletion mutant accumulated 12, the substrate for the ptlE gene product, while the corresponding single DeltaptlE mutant produced 12 as well as the related oxidation products 14 and 15. Engineered strains of S. avermitilis, SUKA5 and pKU462::ermRp-ptl cluster, harboring the complete (neo)ptl cluster produced the oxidized lactone 18 and the closely related seco acid hydrolysis products 16 and 17.