The pentalenolactone biosynthetic gene clusters have been cloned and sequenced from two known producers of the sesquiterpenoid antibiotic pentalenolactone, Streptomyces exfoliatus UC5319 and Streptomyces arenae TÜ469. The recombinant enzymes PenE and PntE, from S. exfoliatus and S. arenae, respectively, catalyze the flavin-dependent Baeyer-Villiger oxidation of 1-deoxy-11-oxopentalenic acid (7) to pentalenolactone D (8). Recombinant PenD, PntD, and PtlD, the latter from Streptomyces avermitilis, each catalyze the Fe(2+)-α-ketoglutarate-dependent oxidation of pentalenolactone D (8) to pentalenolactone E (15) and pentalenolactone F (16). Incubation of PenD, PntD, or PtlD with the isomeric neopentalenolactone D (9) gave PL308 (12) and a compound tentatively identified as neopentalenolactone E (14). These results are corroborated by analysis of the ΔpenD and ΔpntD mutants of S. exfoliatus and S. arenae, respectively, both of which accumulate pentalenolactone D but are blocked in production of pentalenolactone as well as the precursors pentalenolactones E and F. Finally, complementation of the previously described S. avermitilis ΔptlE ΔptlD deletion mutant with either penE or pntE gave pentalenolactone D (8), while complemention of the ΔptlE ΔptlD double mutant with pntE plus pntD or penE plus pntD gave pentalenolactone F (16).