Avermectin and its analogues, produced by Streptomyces avermitilis, are major commercial antiparasitic agents in the field of animal health, agriculture, and human infections. They are 16-membered pentacyclic lactone compounds derived from polyketide and linked to a disaccharide of the methylated deoxysugar L-oleandrose. Labeling studies, analyses of the biosynthetically blocked mutants, and the identification of the avermectin gene cluster allows characterization of most of the biosynthetic pathway. Recent completion of S. avermitilis genome sequencing is also expected to help in revealing the precise biosynthetic sequence and the complicated regulatory mechanism for avermectin biosynthesis, which has been long-awaited to be elucidated. The well characterized avermectin biosynthetic pathway and availability of S. avermitilis genome information in combination with the recent development of combinatorial biosynthesis should allow us to redesign more potent avermectin analogues and to engineer S. avermitilis as a more efficient host for the production of important commercial analogues.