In all 312 actinomycete strains were isolated from water and soil samples from different regions. All these isolates were purified and screened for their antifungal activity against pathogenic fungi. Out of these, 22% of the isolates exhibited activity against fungi. One promising strain, Streptomyces albidoflavus PU 23 with strong antifungal activity against pathogenic fungi was selected for further studies. Antibiotic was extracted and purified from the isolate. Aspergillus spp. was most sensitive to the antibiotic followed by other molds and yeasts. The antibiotic was stable at different temperatures and pH tested and there was no significant loss of the antifungal activity after treatment with various detergents and enzymes. Synergistic effect was observed when the antibiotic was used in combination with hamycin. The antibiotic was fairly stable for a period of 12 months at 4 degree C. The mode of action of the antibiotic seems to be by binding to the ergosterol present in the fungal cell membrane resulting in the leakage of intracellular material and eventually death of the cell. The structure of the antibiotic was determined by elemental analysis and by ultraviolet (UV), Fourier transform infrared (FTIR), nuclear magnetic resonance (NMR) and liquid chromatography mass spectra (LCMS). The antibiotic was found to be a straight chain polyhydroxy, polyether, non-proteinic compound with a single double bond, indicating a nonpolyene antifungal antibiotic.