This paper reports the isolation from soil of Penicillium strain PY-1 with strong antagonistic activity against plant pathogenic fungi. On the basis of its morphological characteristics and the sequence of the ITS region, strain PY-1 was identified as P. oxalicum. Strain PY-1 produces antifungal substances that suppress the mycelial growth of Sclerotinia sclerotiorum and many other plant pathogenic fungi tested; the highest antagonistic activity was detected at 72 h when cultured in a 250-ml flask containing 80 ml potato dextrose broth. Compared with carbendazim, the relative activity of the antifungal substances produced by strain PY-1 was approximately 4 lg active ingredient (a.i.) per milliliter. The antifungal substances were extracted with ethyl acetate and further separated by high-performance liquid chromatography (HPLC); at least two active components were discovered. The ability to control plant disease with strain PY-1 was confirmed with S. sclerotiorum, a widespread pathogenic fungus that attacks rapeseed (Brassica napus) and other plants. Spores (10 6 or 10 7 ml -1 ) and filtrate (tenfold diluted or undiluted) of strain PY-1 could significantly suppress infection and/or the extent of infection by S. sclerotiorum of plants at seven-true-leaves stage. The potential of strain PY-1 for identifying new antibiotics to control fungal disease and for biological control of plant disease, for example oilseed rape stem rot, is discussed.