Pseudomonas aeruginosa PGPR2 was found to protect mungbean plants from charcoal rot disease caused by Macrophomina phaseolina. Secondary metabolites from the culture supernatant of P. aeruginosa PGPR2 were extracted with ethyl acetate and the antifungal compound was purified by preparative HPLC using reverse phase chromatography. The purified compound showed antifungal activity against M. phaseolina and other phytopathogenic fungi (Fusarium sp., Rhizoctonia sp. Alternaria sp., and Aspergillus sp.). The structure of the purified compound was determined using H-1, C-13, 2D NMR spectra and liquid chromatography-mass spectrometry (LC-MS). Spectral data suggest that the antifungal compound is 3,4-dihydroxy-N-methyl-4-(4-oxochroman-2-yl)butanamide, with the chemical formula C14H17NO5 and a molecular mass of 279. Though chemically synthesized chromanone derivatives have been shown to have antifungal activity, we report for the first time, the microbial production of a chromanone derivative with antifungal activity. This ability of P. aeruginosa PGPR2 makes it a suitable strain for biocontrol.