An endophytic fungus of Persea indica was identified, on the basis of its anamorphic stage, as Nodulosporium sp. by SEM. Partial sequence analysis of ITS rDNA revealed the identity of the teleomorphic stage of the fungus as Hypoxylon sp. It produces an impressive spectrum of volatile organic compounds (VOCs), most notably 1,8-cineole, 1-methyl-1,4-cyclohexadiene, and tentatively identified (+)-.alpha.-methylene-.alpha.-fenchocamphorone, among many others, most of which are unidentified. Six-day-old cultures of Hypoxylon sp. displayed maximal VOC-antimicrobial activity against Botrytis cinerea, Phytophthora cinnamomi, Cercospora beticola, and Sclerotinia sclerotiorum suggesting that the VOCs may play some role in the biology of the fungus and its survival in its host plant. Media containing starch- or sugar-related substrates best supported VOC production by the fungus. Direct on-line quantification of VOCs was measured by proton transfer mass spectrometry covering a continuous range with optimum VOC production occurred at 6 days at 145 ppmv with a rate of production of 7.65 ppmv/h. This report unequivocally demonstrates that 1,8-cineole (a monoterpene) is produced by a microorganism, which represents a novel and important source of this compound. This monoterpene is an octane derivative and has potential use as a fuel additive as do the other VOCs of this organism. Thus, fungal sourcing of this compound and other VOCs as produced by Hypoxylon sp. greatly expands their potential applications in medicine, industry, and energy production.