Embryos of the shrimp Palaemon macrodactylus are remarkably resistant to infection by the fungus Lagenidium callinectes, a recognized pathogen of many crustaceans. An Alteromonas sp. bacterial strain consistently isolated from the surface of the embryos, produces 2,3-indolinedione (isatin), a compound that inhibits the pathogenic fungus. If exposed to the fungus, bacteria-free embryos quickly die, whereas similar embryos reinoculated with the bacteria or treated only with 2,3-indolinedione live well. The commensal Alteromonas sp. bacteria protect shrimp embryos from fungal infection by producing and liberating the antifungal metabolite 2,3-indolinedione.