The complex morphogenesis of the bacterial genus Streptomyces has made this genus a model prokaryote for study of multicellular differentiation, and its ability to produce a wide variety of secondary metabolites has made it an excellent supplier of biologically active substances, including antibiotics. This review summarizes our study of these two characteristics of Streptomyces, focusing on the A-factor regulatory cascade and work derived from the A-factor study. A microbial hormone, A-factor (2-isocapryloyl-3R-hydroxymethyl-gamma-butyrolactone), triggers morphological differentiation and secondary metabolism in Streptomyces griseus. The key steps in the A-factor regulatory cascade, including afsA, encoding the key enzyme for A-factor biosynthesis, arpA, encoding the A-factor receptor, and adpA, encoding a transcriptional activator, are elucidated. The target genes of the regulatory cascade include genes of various functions required for morphological development and secondary metabolite formation. The biosynthesis gene clusters for grixazone and hexahydroxyperylenequinone are examples. The former contains the enzymes for novel benzene ring formation and phenoxazinone formation, and the latter contains enzymes belonging to a type III polyketide synthase and a cytochrome P-450. Enzymes of various catalytic functions in Streptomyces are useful as members of an artificial gene cluster constructed in Escherichia coli for fermentative production of plant-specific flavonoids, including isoflavones and unnatural compounds.