Aim: To study the antagonistic activity by Pseudomonas fluorescens strain 96.578 on the plant pathogenic fungus Rhizoctonia solani. Methods and Results: Strain 96.578 produced a new cyclic lipopeptide, tensin. High tensin production per cell was detected in liquid media with glucose, mannitol or glutamate as growth substrate while fructose, sucrose and asparagine supported low production. Tensin production was nearly constant in media with different initial C levels, while low initial N contents reduced production. When applied to sugar beet seeds, strain 96.578 produced tensin during seed germination. When challenged with strain 96.578 or purified tensin, Rhizoctonia solani reduced radial mycelium extension but increased branching and rosette formation. Conclusion: The antagonistic activity of strain 96.578 towards Rhizoctonia solani was caused by tensin. Significance and Impact of the Study: When coated onto sugar beet seeds, tensin production by strain 96.578 could be of significant importance for inhibition of mycelial growth and seed infection by Rhizoctonia solani.