Sequence analysis of a 3.4-kb region Streptomyces peucetius daunorubicin (DNR) gene cluster established the presence of the dnrH and dnmT genes. In dnrH mutants, DNR production increased 8.5-fold, compared with that in the wild-type strain, while dnmT mutants accumulated epsilon-rhodomycinone (RHO), which normally becomes glycosylated in daunorubicin biosynthesis. Hence, dnmT may be involved in the biosynthesis or attachment of daunosamine to RHO or in the regulation of this process. Since the DnrH protein is similar to known glycosyl transferases, this protein may catalyze the conversion of DNR to its polyglycosylated forms, known as baumycins. Overexpression of dnmT in the wild-type and dnrH mutant strains resulted in a major decrease in RHO accumulation and increase in DNR production.