This study shows for the first time that Tolypocladium species produce efrapeptins, a group of toxic peptides, in vivo but the quantities are too small to account for insect death, suggesting that these insecticidal compounds work in concert with other pathogenicity determinants. There is inter- and intraspecific variation in efrapeptin production in vitro by Tolypocladium species. T. parasiticum produced only efrapeptin E, in small quantities. Efrapeptins were detectable 48 h after inoculation and increased with biomass. The relative amounts of individual efrapeptins (C, D, E, F, G) produced by T. niveum in vitro were D > E > F > C > G but in vivo they were D > F > C > E > G. Efrapeptins were toxic to a wide range of insects when injected into the haemocoel. Mortality was dose-related. Efrapeptins also exhibited limited antifungal and antibacterial activity. Micrococcus luteus was considered an excellent indicator of efrapeptin presence in culture filtrate extracts because of its extreme sensitivity to these compounds.