This paper highlights the antagonism effect of Penicillium isolates, which were screened against the test organisms such as Staphylococcus aureus, E. coli and Penicillium sp. Penicillium notatum and Penicillium chrysogenum isolates were used for penicillin biosynthesis. The antibacterial activities of fermented crude penicillin extract were assayed by disc diffusion method. Maximum antibacterial activity was observed in Gram positive organisms (Staphylococcus aureus) when compared with Gram negative organisms. The isolated Penicillium chrysogenum can be used for large-scale penicillin antibiotic production.