Enhanced prostaglandin production during fungal infection could be an important factor in promoting fungal colonization and chronic infection. Host cells are one source of prostaglandins; however, another potential source of prostaglandins is the fungal pathogen itself. Our objective was to determine if the pathogenic yeasts Cryptococcus neoformans and Candida albicans produce prostaglandins and, if so, to begin to define the role of these bioactive lipids in yeast biology and disease pathogenesis. C. neoformans and C. albicans both secreted prostaglandins de novo or via conversion of exogenous arachidonic acid. Treatment with cyclooxygenase inhibitors dramatically reduced the viability of the yeast and the production of prostaglandins, suggesting that an essential cyclooxygenase like enzyme may be responsible for fungal prostaglandin production. A PGE series lipid was purified from both C. albicans and C. neoformans and was biologically active on both fungal and mammalian cells. Fungal PGE(x) and synthetic PGE(2) enhanced the yeast-to-hypha transition in C. albicans. Furthermore, in mammalian cells, fungal PGE(x) down-modulated chemokine production, tumor necrosis factor alpha production, and splenocyte proliferation while up-regulating interleukin 10 production. These are all activities previously documented for mammalian PGE(2). Thus, eicosanoids are produced by pathogenic fungi, are critical for growth of the fungi, and can modulate host immune functions. The discovery that pathogenic fungi produce and respond to immunomodulatory eicosanoids reveals a virulence mechanism that has potentially great implications for understanding the mechanisms of chronic fungal infection, immune deviation, and fungi as disease cofactors.