Nanaomycin D reductase which is involved in the biosynthesis of the antifungal antibiotic nanaomycin catalyzes the formation of nanaomycin A from nanaomycin D in the presence of NADH under anaerobic conditions. On the other hand, under aerobic conditions NADH is consumed and nanaomycin A formation is markedly reduced. These findings suggest that nanaomycin A synthesis is not due to the direct reduction of the 5-membered lactone ring of nanaomycin D. Reduction of various quinones by the enzyme was examined. It was found that nanaomycin A is converted to its hydroquinone derivative in the presence of NADH under anaerobic conditions, whereas NADH consumption alone is observed under aerobic conditions. When p-benzoquinone, 1,4-naphthoquinone or menadione is used instead of nanaomycin D, NADH is also consumed. These results indicate that: (1) these compounds act as electron acceptors, (2) O2 functions as final electron acceptor under aerobic conditions, and (3) nanaomycin D reductase is, in fact, an NADH dehydrogenase (quinone). Changes in the UV-absorption spectrum of a reaction mixture containing nanaomycin D and NADH indicate that a hydroquinone derivative is formed as an intermediate during nanaomycin A formation. Similar results were obtained when nanaomycin D is reduced chemically with NaBH4 or Zn powder. It was concluded that nanaomycin D is converted to a hydroquinone derivative and that nanaomycin A is then formed nonenzymatically through intramolecular electron transfer.