The development of expressed sequence tag (EST) databases, directed transformation and a sequenced genome has facilitated the functional analysis of Fusarium graminearum genes. Extensive analysis of 10,397 ESTs, derived from thirteen cDNA libraries of F. graminearum grown under diverse conditions, identified a novel cluster of eight genes (gene loci fg08077-fg08084) located within a 17kb region of genomic sequence contig 1.324. The expression of these genes is concomitantly up-regulated under growth conditions that promote mycotoxin production. Gene disruption and add-back experiments followed by metabolite analysis of the transformants indicated that one of the genes, fg08079, is involved in butenolide synthesis. The mycotoxin butenolide is produced by several Fusarium species and has been suggested, but not proven, to be associated with tall fescue toxicoses in grazing cattle. This is the first report of the identification of a gene involved in the biosynthetic pathway of butenolide.