A bacterial strain, Bacillus cereus M-1 (16) (MTCC 5521), isolated and identified in our laboratory produces a green pigment when grown in nutrient broth at stationary condition. Optimum fermentation parameters for maximum pigment production are pH 7.0, temperature 30A degrees C, time of incubation 72 h and inoculum volume 1% from 20 h grown cell suspension. Magnesium ion enhances pigment production whereas calcium and zinc ions inhibit the process. The pigment is better extracted from the fermented broth with chloroform in comparison with diethyl ether, ethyl acetate, and butanol. The extracted crude pigment consists of three fractions as revealed from thin layer chromatogram on silica gel GF254 using ethyl acetate and hexane (1:1) solvent system. The major fraction C-3 shows antibacterial activity against different gram positive bacteria. The proposed structure of C-3 is 9-methyl-1,4,5,8-tetra-azaphenanthrene obtained by elemental analysis, GC-MS, and NMR spectra studies.