Aims: To investigate the in vitro antibacterial activity and antifungal mode of action of flocculosin, a cellobiose lipid produced by Pseudozyma flocculosa. Methods and Results: When tested against clinical bacterial isolates, the compound was particularly active against Gram-positive bacteria and its effect was not mitigated against isolates known as resistant to other antibiotics. The antifungal activity of flocculosin was found to be rapid and concentration-dependent. At lethal concentrations against Candida albicans, flocculosin caused a rapid leakage of intracellular potassium and inhibited acidification of the medium by plasma membrane ATPases suggesting a physical rather than a biochemical effect. TEM observations of cells exposed 6 h to flocculosin revealed disrupted membranes and disorganized mitochondria. Conclusions: Data obtained in this study confirm that flocculosin acts by disrupting the membrane surface of sensitive micro-organisms. Significance and Impact of the Study: The elucidation of an antifungal mode of action of flocculosin can be exploited in furthering its antimicrobial potential against fungi and bacteria whose cell membranes are particularly sensitive to the action of the molecule.