Genomic DNA from the insect pathogenic fungus Beauveria bassiana was used as a template in a PCR with degenerate primers designed to amplify a fragment of a C-methyl transferase (CMeT) domain from a highly reduced fungal polyketide synthase (PKS). The resulting 270-bp PCR product was homologous to other fungal PKS CMeT domains and was used as a probe to isolate a 7.3-kb fragment of genomic DNA from a BamH1 library. Further library probing and TAIL-PCR then gave a 21.9-kb contig that encoded a 12.9-kb fused type I PKS–NRPS ORF together with ORFs encoding other oxidative and reductive enzymes. A directed knockout experiment with a BaR cassette, reported for the first time in B. bassiana, identified the PKS–NRPS as being involved in the biosynthesis of the 2-pyridone tenellin. Other fungal PKS–NRPS genes are known to be involved in the formation of tetramic acids in fungi, and it thus appears likely that related compounds are precursors of 2-pyridones in fungi. B. bassiana tenellin KO and WT strains proved to be equally pathogenic towards insect larvae; this indicated that tenellin is not involved in insect pathogenesis.