Streptomyces arenae produces the aromatic polyketide naphthocyclinone, which exhibits activity against Gram-positive bacteria. A cosmid clone containing the putative naphthocyclinone gene cluster was isolated from a genomic library of S. arenae by hybridization with a conserved region from the actinorhodin PKS of S. coelicolor. Sequence analysis of a 5.5-kb DNA fragment, which hybridizes with the actI probe, revealed three open reading frames coding for the minimal polyketide synthase. A strong sequence similarity was found to several previously described ketosynthases, chain length factors and acyl carrier proteins from other polyketide gene clusters. An additional open reading frame downstream of the PKS genes of S. arenae showed 53% identity to act VII probably encoding an aromatase. Another open reading frame was identified in a region of 1.436 bp upstream of the PKS genes, which, however, had no similarity to known genes in the database. Approximately 8 kb upstream of the PKS genes, a DNA fragment was identified that hybridizes to an actVII--actIV specific probe coding for a cyclase and a putative regulatory protein, respectively. Disruption of the proposed naphthocyclinone gene cluster by insertion of a thiostrepton resistance gene completely abolished production of naphthocyclinones in the mutant strain, showing that indeed the naphthocyclinone gene cluster had been isolated. Heterologous expression of the minimal PKS genes in S. coelicolor CH999 in the presence of the act ketoreductase led to the production of mutactin and dehydromutactin, indicating that the S. arenae polyketide synthase forms a C-16 backbone that is subsequently dimerized to build naphthocyclinone. The functions of the proposed cyclase and aromatase were examined by coexpression with genes from different polyketide core producers.