Xenorhabdus and Photorhabdus spp. are enteric bacterial symbionts of Steinernema and Heterorhabditis nematodes, respectively. These bacteria produce an extensive set of natural products (NPs) with antibacterial, antifungal, antiprotozoal, insecticidal, or other bioactivities when vectored into insect hemocoel by nematodes. We assessed the in vitro activity of different Xenorhabdus and Photorhabdus cell-free supernatants against important fungal phytopathogens, viz., Cryphonectria parasitica, Fusarium oxysporum, Rhizoctonia solani, and Sclerotinia sclerotiorum and identified the bioactive antifungal compound/s present in the most effective bacterial supernatant using the easyPACId (easy promoter-activated compound identification) approach against chestnut blight C. parasitica. Our data showed that supernatants from Xenorhabdus species were comparatively more effective than extracts from Photorhabdus in suppressing the fungal pathogens; among the bacteria assessed, Xenorhabdus szentirmaii was the most effective species against all tested phytopathogens especially against C. parasitica. Subsequent analysis revealed fabclavines as antifungal bioactive compounds in X. szentirmaii, generated by a polyketide synthase (PKS) and non-ribosomal peptide synthetase (NRPS) hybrid system. Fabclavines are broad-spectrum, heat-stable NPs that have great potential as biological control compounds against fungal plant pathogens. More studies are needed to assess the potential phytotoxicity of these compounds and their effects on non-target organisms before commercialization.