From cell cultures of Suberites domuncula was isolated a bacterial strain, SDC-1, which was identified by 16S ribosomal RNA sequence analysis as an alpha-Proteobacterium of the genus Ruegeria. The occurrence of the strain in sponge cell culture could be explained by its resistance to the antibiotics used in the isolation of sponge cell cultures or by the preservation of SDC-1 by host sponge cells. The fatty acid composition of SDC-1 is characterized by branched C-12 methyl fatty acids. Two new and 8 known cyclic dipeptides were isolated and characterized from the fermentation broth of SDC-1. Cyclodipeptides are one of the families of cell-cell signaling compounds and may have some role to play in sponge-bacteria interactions.