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The aim of the present study was to purify and characterize a natural antimicrobial compound from Bacillus sp. strain N associated with a novel rhabditid entomopathogenic nematode.The cell-free culture filtrate of a bacterium associated with a novel entomopathogenic nematode (EPN), Rhabditis (Oscheius) sp. exhibited strong antimicrobial activity. The ethyl acetate extract of the bacterial culture filtrate was purified by column chromatography, and two bioactive compounds were isolated and their chemical structures were established based on spectral analysis. The compounds were identified as 3,4′,5-trihydroxystilbene (1) and 3,5-dihydroxy-4-isopropylstilbene (2). The presence of 3,4′,5-trihydroxystilbene (resveratrol) is reported for the first time in bacteria. Compound 1 showed antibacterial activity against all the four test bacteria, whereas compound 2 was effective against the Gram-positive bacteria only. Compounds 1 and 2 were active against all the five fungi tested and are more effective than bavistin, the standard fungicide. The antifungal activity of the compounds against the plant pathogenic fungi, Rhizoctonia solani is reported for the first time.Cell-free extract of the bacterium and isolated stilbenes demonstrated high antibacterial activity against bacteria and fungi especially against plant pathogenic fungi. We conclude that the bacterium-associated EPN are promising sources of natural bioactive secondary metabolites.Stilbene compounds can be used for the control of fungi and bacteria.