C-4 hydroxyethyl branched octoses have been observed in polysaccharides of several genera of gram negative bacteria and in various antibiotics produced by gram positive bacteria. The C-4 hydroxyethyl branch was proposed to be converted from C-4 acetyl branch by an uncharacterized ketoreduction step. Paulomycins (PAUs) are glycosylated antibiotics with potent inhibitory activity against gram positive bacteria and are structurally defined by its unique C-4' hydroxyethyl branched paulomycose moiety. A novel aldo-keto-reductase, Pau7 was characterized as the enzyme catalyzing the stereospecific ketoreduction of 7'-keto of PAU E (1) to give the C-4' hydroxyethyl branched paulomycose moiety of PAU F (2). An acyltransferase Pau6 further decorates the C-4' hydroxyethyl branch of paulomycose moiety of 2 by attaching various fatty acyl chains to 7'-OH to generate diverse PAUs. In addition, another acyltransferase Pau24 was proposed to be responsible for the 13-O-acetylation of PAUs.