A novel anti-influenza virus compound, flutimide, was identified in extracts of a recently identified fungal species, Delitschia confertaspora (F. Pelaez, J.D. Polishook, M. Valldosera, and J.Guarro, Mycotaxon 50:115-122, 1994). The compound, a substituted 2,6-diketopiperazine, selectively inhibited the cap-dependent transcriptase of influenza A and B viruses and had no effect on the activities of other polymerases. Similar to the 4-substituted 2,4-dioxobutanoic acids, a series of transcriptase inhibitors which we described previously (J. Tomassini, H. Selnick, M.E. Davies, M.E. Armstrong, J. Baldwin, M. Bourgeois, J.Hastings, D. Hazuda, J. Lewis, W. McClements, G. Ponticello, E. Radzilowski, G. Smith, A. Tebben, and A. Wolfe, Antimicrob. Agents Chemother. 38:2827-2837, 1994), this inhibitor, which is a natural product, affected neither the initiation nor the elongation of influenza virus mRNA synthesis, but it specifically targeted the cap-dependent endonuclease of the transcriptase. Additionally, the compound was inhibitory to the replication of influenza A and B viruses in cell culture. The selective antiviral properties of this compound further demonstrate the utility of influenza virus endonuclease as a target of antiviral agents.