The terpene synthase encoded by the sav76 gene of Streptomyces avermtilis was expressed in Escherichia coil as an N-terminal-His(6)-tag protein, using a codon-optimized synthetic gene. Incubation of the recombinant protein, SAV_76, with farnesyl diphosphate (1, FPP) in the presence of Mg2+ gave a new sesquiterpene alcohol avermitilol (2), whose structure and stereochemistry were determined by a combination of H-1, C-13, COSY, HMQC, HMBC, and NOESY NMR, along with minor amounts of germacrene A (3), germacrene B (4), and viridiflorol (5). The absolute configuration of 2 was assigned by H-1 NMR analysis of the corresponding (R)- and (S)-Mosher esters. The steady state kinetic parameters were k(cat), 0.040 +/- 0.001 s(-1) and K-m 1.06 +/- 0.11 mu M. Individual incubations of recombinant avermitilol synthase with [1,1-H-2(2)]FPP (1a), (1S)-[1-H-2]-FPP (1b), and (1R)-[1-H-2]-FPP (1c) and NMR analysis of the resulting avermitilols supported a cyclization mechanism involving the loss of H-1(re) to generate the intermediate bicyclogermacrene (7), which then undergoes proton-initiated anti-Markovnikov cyclization and capture of water to generate 2. A copy of the sav76 gene was reintroduced into S. avermitilis SUKA17, a large deletion mutant from which the genes for the major endogenous secondary metabolites had been removed, and expressed under control of the native S. avermitilis promoter rpsJp (sav4925). The resultant transformants generated avermitilol (2) as well as the derived ketone, avermitilone (8), along with small amounts of 3, 4, and 5. The biochemical function of all four terpene synthases found in the S. avermtilis genome have now been determined.