Chromobacterium sp. strain C61 displays antifungal activities in vitro and has been used successfully for the biocontrol of plant diseases under field conditions. In this study, the roles of extracellular chitinase and an antifungal compound produced by strain C61 were investigated to elucidate their contributions to biological control activity. The bacterium possessed a locus chi54 encoding an extracellular chitinase, and mutation of chi54 eliminated chitinase production. Production of the extracellular enzyme and expression of the chi54 transcript were increased in the wild-type strain when chitin was added to the culture medium. In vitro assays showed that purified chitinase inhibited spore germination of multiple pathogens. However, the in planta biocontrol activity of filtrates of cultures grown in the presence of chitin was lower than that of filtrates grown without chitin, indicating that correlation between chitinase and biocontrol activity was lacking. The analysis of C61 culture filtrates revealed an antifungal cyclic lipopeptide, chromobactomycin, whose structure contained a unique nonameric peptide ring. The purified chromobactomycin inhibited the growth of several phytopathogenic fungi in vitro, and plant application significantly reduced disease severity for several pathogens. Furthermore, the production of chromobactomycin was reduced in cultures amended with chitin. These data suggest that the production of both the extracellular chitinase Chi54 and the newly identified antibiotic chromobactomycin can contribute, in an interconnected way, to the suppression of plant disease by Chromobacterium sp. strain C61.