Serratia marcescens W1, isolated from cucumbercultivated soil in Suwon, Korea, evidenced profound antifungal activity and produced the extracellular hydrolytic enzymes, chitinase and protease. In order to isolate the antifungal genes from S. marcescens W1, a cosmid genomic library was constructed and expressed in Escherichia coli. Transformants exhibiting chitinase and protease expression were selected, as well as those transformants evidencing antifungal effects against the rice blast fungus, Magnaporthe grisea, and the cucumber leaf spot fungus, Cercospora citrullina. Cosmid clones expressing chitinase or protease exerted no inhibitory effects against the growth of fungal pathogens. However, two cosmid clones evidencing profound antifungal activities were selected for further characterization. An 8.2 kb HindIII fragment from these clones conditioned the expression of antagonistic activity, and harbored seven predicted complete open reading frames (ORFs) and two incomplete ORFs. The deduced amino acid sequences indicated that six ORFs were highly homologous with genes from S. marcescens generating pyrroloquinoline quinone (PQQ). Only subclones harboring the full set of pqq genes were shown to solubilize insoluble phosphate and inhibit fungal pathogen growth. The results of this study indicate that the functional expression of the pqq genes of S. marcescens W1 in E. coli may be involved in antifungal activity, via as-yet unknown mechanisms.