Complementation of a mutant lacking avermectin B 5-O-methyltransferase (AveD) of Streptomyces avermitilis, which catalyses the methylation of the hydroxyl group at the C5 position of avermectin B compounds, revealed that the gene encoding AveD is in a 1.25-kb SalI-EcoNI fragment in the left region of the gene cluster for avermectin biosynthesis. The nucleotide sequence of this fragment predicted a 283-aa gene product homologous to several methyltransferases requiring S-adenosyl-l-methionine as a cofactor. After cloning of the aveD region from mutant not producing AveD, the complementation experiments were performed using a pair of hybrid fragments (AveD+/AveD- and AveD-/AveD+). They suggest that the mutation(s) is in the N-terminus of AveD. SSCP analysis of amplified DNA of the aveD region derived from both wild type and mutant strains supports the results of the complementation experiments. Sequence analysis of the aveD region of the mutant strain revealed that a point mutation is within ORF, being Thr23-->Ile substitution. This mutation causes the inactivation of O-methyltransferase activity of AveD.