Natamycin is a polyene antibiotic that is commonly used as an antifungal agent because of its broad spectrum of activity and the lack of development of resistance. Other polyene antibiotics, like nystatin and filipin are known to interact with sterols, with some specificity for ergosterol thereby causing leakage of essential components and cell death. The mode of action of natamycin is unknown and is investigated in this study using different in vitro and in vivo approaches. Isothermal titration calorimetry and direct binding studies revealed that natamycin binds specifically to ergosterol present in model membranes. Yeast sterol biosynthetic mutants revealed the importance of the double bonds in the B-ring of ergosterol for the natamycin-ergosterol interaction and the consecutive block of fungal growth. Surprisingly, in strong contrast to nystatin and filipin, natamycin did not change the permeability of the yeast plasma membrane under conditions that growth was blocked. Also, in ergosterol containing model membranes, natamycin did not cause a change in bilayer permeability. This demonstrates that natamycin acts via a novel mode of action and blocks fungal growth by binding specifically to ergosterol.