The Streptomyces peucetius dpsY and dnrX genes govern early and late steps in the biosynthesis of the clinically valuable antitumor drugs daunorubicin (DNR) and doxorubicin (DXR). Although their deduced products resemble those of genes thought to be involved in antibiotic production in several other bacteria, this information could not be used to identify the functions of dpsY and dnrX. Replacement of dpsY with a mutant form disrupted by insertion of the aphII neomycin-kanamycin resistance gene resulted in the accumulation of UWM5, the C-19 ethyl homolog of SEK43, a known shunt product of iterative polyketide synthases involved in the biosynthesis of aromatic polyketides. Hence, DpsY must act along with the other components of the DNR-DXR polyketide synthase to form 12-deoxyaklanonic acid, the earliest known intermediate of the DXR pathway. Mutation of dnrX in the same way resulted in a threefold increase in DXR production and the disappearance of two acid-sensitive, unknown compounds from culture extracts. These results suggest that dnrX, analogous to the role of the S. peucetius dnrH gene (C. Scotti and C. R. Hutchinson, J. Bacteriol. 178:7316-7321, 1996), may be involved in the metabolism of DNR and/or DXR to acid-sensitive compounds, possibly related to the baumycins found in many DNR-producing bacteria.