Photorhabdus is a genus of Gram-negative bacteria from the family Enterobacteriaceae. Members of Photorhabdus have a complex life cycle during which the bacterium has a pathogenic interaction with insect larvae whilst also maintaining a mutualistic relationship with nematodes from the family Heterorhabditidae. During growth in the insect, Photorhabdus bacteria produce a broad-spectrum antibiotic identified as 3,5-dihydroxy-4-isopropylstilbene (ST). The biochemical pathway responsible for the production of this antibiotic has not been characterized. In this report, a mutant strain of Photorhabdus luminescens subsp. laumondii TT01, BMM901, has been isolated, by transposon mutagenesis, that is unable to produce the ST antibiotic. Using in silico studies, feeding experiments and biochemical analyses, it is shown that the gene mutated in this strain, stlA, encodes phenylalanine ammonia-lyase (PAL). PAL catalyses the non-oxidative deamination of l-phenylalanine to trans-cinnamic acid and the enzyme is ubiquitous in plants, where it is involved in the production of phenylpropanoids such as lignin and phytoalexins. However, this is the first report of PAL activity in a member of the Proteobacteria.