To study the inhibitory mechanism of microorganisms and their secondary metabolite against fungus such as Aspergillus flavus 2219, the active substance pamamycin produced by metabolism of Streptomyces alboflavus TD-1 screened from soil was isolated using thin layer chromatography, silica gel column chromatography, high performance liquid chromatography (HPLC) and liquid chromatography-mass spectrometry. The inhibitory effect and mechanism of pamamycin against Aspergillus flavus 2219 and other fungus were determined by scanning electron microscope (SEM), fluorescence microscope and HPLC. Results showed that the molecular formula of active substances in the supernatant and mycelium of streptomyces alboflavus TD-1 was predicted to be C₃₅H₆₁NO₇, pamamycin and its homologue, and the relative molecular weight were 593,607, 621,635, 649. According to SEM observation, the morphology of fungus cells treated with pamamycin was distorted in different extent. The minimum inhibitory concentration (MIC) of pamamycin for Penicillium citrus was 0.125mg/mL, for Botrytis cinerea was 0.500mg/mL, and for Aspergillus flavus 2219, Aspergillus niger, Trichoderma harzianum and Aspergillus oryzae was 1.000mg/mL. The action target of pamamycin was ergosterol on fungal cell membrane. The inhibition mechanism was to destroy the integrity of cell wall, change the permeability of cell membrane, affect the energy metabolism of mitochondria, inhibit the ergosterol biosynthesis in mycelial membrane. Pamamycin could reduce the synthesis rate of aflatoxin B₁ by 98.3%. Therefore, Streptomyces alboflavus TD-1 and pamamycin could be used for biological control of toxigenic fungi in raw food materials.