Strain KO-23, an actinomycete producing albonoursin as well as streptopyrone, was identified as Streptomyces albulus by morphological and biochemical studies. Fermentation conditions for albonoursin, a dehydro cyclic dipeptide exhibiting a pronounced inhibitory activity toward pronuclear fusion of sea urchin eggs, were optimized. Under the optimum conditions, the actinomycete produced 16 mg/liter of albonoursin, 30 times higher than that in the original culture. The cells cultivated under these conditions highly express biosynthetic enzymes for albonoursin, and thus are available for biosynthetic studies of dehydro cyclic peptides.