Earlier work has shown that the afsR genetic locus promotes formation of the pigmented antibiotics actinorhodin and undecylprodigiosin in Streptomyces lividans and its close relative, Streptomyces coelicolor. A protein designated as AfsR has been implicated in this activity. We report here the existence of a previously unknown gene, afsR2, which is separate from and adjacent to the AfsR-encoding sequence and which, when present at high copy number, (i) stimulates transcription of biosynthetic and regulatory genes in the actinorhodin gene cluster (act), and (ii) stimulates the synthesis of undecylprodigiosin. We show that the effects of afsR2 on actinorhodin synthesis are mediated through transcription of the actII-ORF4 locus, which encodes a transcriptional activator of other genes in the act cluster. Analysis of the cloned afsR2 gene indicates that its activity is the result of the 63-amino-acid protein it specifies.