In the course of screening for antifungal agents we have discovered a novel compound isolated from an endophytic fungus that inhibits fungal sphingolipid synthesis. Khafrefungin, which is composed of aldonic acid linked via an ester to a C22 modified alkyl chain, has fungicidal activity against Candida albicans, Cryptococcus neoformans, and Saccharomyces cerevisiae. Sphingolipid synthesis is inhibited in these organisms at the step in which phosphoinositol is transferred to ceramide, resulting in accumulation of ceramide and loss of all of the complex sphingolipids. In vitro, khafrefungin inhibits the inositol phosphoceramide synthase of C. albicans with an IC50 of 0.6 nM. Khafrefungin does not inhibit the synthesis of mammalian sphingolipids thus making this the first reported compound that is specific for the fungal pathway.