Gene clusters for biosynthesis of the fungal polyketides hypothemycin and radicicol from Hypomyces subiculosus and Pochonia chlamydosporia, respectively, were sequenced. Both clusters encode a reducing polyketide synthase (PKS) and a nonreducing PKS like those in the zearalenone cluster of Gibberella zeae, plus enzymes with putative post-PKS functions. Introduction of an O-methyltransferase (OMT) knockout construct into H. subiculosus resulted in a strain with increased production of 4-O-desmethylhypothemycin, but because transformation of H. subiculosus was very difficult, we opted to characterize hypothemycin biosynthesis using heterologous gene expression. In vitro, the OMT could methylate various substrates lacking a 4-O-methyl group, and the flavin-dependent monooxygenase (FMO) could epoxidate substrates with a 1,2 double bond. The glutathione S-transferase catalyzed cis-trans isomerization of the 7,8 double bond of hypothemycin. Expression of both hypothemycin PKS genes (but neither gene alone) in yeast resulted in production of trans-7,8-dehydrozearalenol (DHZ). Adding expression of OMT, expression of FMO, and expression of cytochrome P450 to the strain resulted in methylation, 1,2-epoxidation, and hydroxylation of DHZ, respectively. The radicicol gene cluster encodes halogenase and cytochrome P450 homologues that are presumed to catalyze chlorination and epoxidation, respectively. Schemes for biosynthesis of hypothemycin and radicicol are proposed. The PKSs encoded by the two clusters described above and those encoded by the zearalenone cluster all synthesize different products, yet they have significant sequence identity. These PKSs may provide a useful system for probing the mechanisms of fungal PKS programming.Hypothemycin and structurally related compounds are resorcylic acid lactones (RALs) that are produced by Hypomyces subiculosus and other fungi (1,7, 14,25,26,28,43). The structures of some naturally occurring RALs are shown in Fig.