Abstract: Agricultural Antibiotic 120 (AA 120) is a product of an actinomycete, Streptomyces hygrospinosus var. beijingensis. Two strains of the actinomycete, TF-120 and KT-739, were found to have similar biophysical and chemical properties and complementary biological activities against target pathogens. The latter strain had higher growth rate. Protoplast formation, regeneration, and fusion of the protoplast of the two strains were achieved in the laboratory. A new strain, FR-220, was then selected from ca. 1,000 recombinants. Results of the laboratory analysis and fermentation trials showed that the new strain is a stable, high-yielding and effective control agent against the target pathogens. The fermentation efficacy in the production of AA 120 was increased from 6,000-8,000 ug/ml by using strain TF-120 to 14,000-17,000 ug/ml by using FR-220, resulting in a 50% reduction of the production cost. In the field trials in a total area of 133 ha, spray of AA 120 produced with the new strain gave 70-90X control effect against powdery mildew, anthracnose, and wilt disease on melons, fruit trees and vegetables. During 1988-1989, AA 120 produced with the new strain was applied in an area of 13,300 ha.