Streptomyces ambofaciens produces an orange pigment and the antibiotic alpomycin, both of which are products of a type II polyketide synthase gene cluster identified in each of the terminal inverted repeats of the linear chromosome. Five regulatory genes encoding Streptomyces antibiotic regulatory proteins (alpV, previously shown to be an essential activator gene; alpT; and alpU) and TetR family receptors (alpZ and alpW) were detected in this cluster. Here, we demonstrate that AlpZ, which shows high similarity to-butyrolactone receptors, is at the top of a pathway-specific regulatory hierarchy that prevents synthesis of the alp polyketide products. Deletion of the two copies of alpZ resulted in the precocious production of both alpomycin and the orange pigment, suggesting a repressor role for AlpZ. Consistent with this, expression of the five alp-located regulatory genes and of two representative biosynthetic structural genes (alpA and alpR) was induced earlier in the alpZ deletion strain. Furthermore, recombinant AlpZ was shown to bind to specific DNA sequences within the promoter regions of alpZ, alpV, and alpXW, suggesting direct transcriptional control of these genes by AlpZ. Analysis of solvent extracts of S. ambofaciens cultures identified the existence of a factor which induces precocious production of alpomycin and pigment in the wild-type strain and which can disrupt the binding of AlpZ to its DNA targets. This activity is reminiscent of-butyrolactone-type molecules. However, the AlpZ-interacting molecule(s) was shown to be resistant to an alkali treatment capable of inactivating-butyrolactones, suggesting that the AlpZ ligand(s) does not possess a lactone functional group.