Both morphogenesis and antibiotic production in the streptomycetes are initiated in response to starvation, and these events are coupled. We previously described a transposon-generated mutant in Streptomyces coelicolor, SE293, that resulted in a bld strain that overproduced the antibiotic actinorhodin. The SCO1135 open reading frame identified by the insertion encodes a member of the TetR family of transcriptional regulators. Here we show that a constructed deletion of the SCO1135 open reading frame resulted in the same morphological and antibiotic production phenotype as the insertion mutant. The constructed deletion also resulted in constitutive expression of SCO1135 transcript, as well as that of the gene cluster immediately adjacent to it, SCO1134-1132, which encodes a putative molybdopterin binding complex. A His 6 -tagged version of the SCO1135 protein product was shown to bind the intergenic region between SCO1135 and SCO1134, which contains the apparent transcription start sites for each gene mapped by primer extension analysis. Increased expression of the SCO1134-1132 transcript in the SCO1135 deletion mutant also resulted in increased expression of xanthine dehydrogenase activity, confirming the predictions about these open reading framed based on protein similarity. We have designated the SCO1134-1142 gene cluster xdhABC and the regulator encoded by SCO1135 xdhR. We speculate that the inappropriate expression of xanthine dehydrogenase affects purine salvaging pathways at the onset of development, creating artificially high concentrations of both GTP and ppGpp and perturbing the pathways these molecules participate in for the initiation of morphogenesis and antibiotic production.