There is an urgent need for new antifungal agents that are both effective and non-toxic in the therapy of systemic mycoses. The model nematode Caenorhabditis elegans has been used both to elucidate evolutionarily conserved components of host-pathogen interactions and to screen large chemical libraries for novel antimicrobial compounds. Here we review the use of C. elegans models in drug discovery and discuss caffeic acid phenethyl ester, a novel antifungal agent identified using an in vivo screening system. C. elegans bioassays allow high-throughput screens of chemical libraries in vivo. This whole-animal system may enable the identification of compounds that modulate immune responses or affect fungal virulence factors that are only expressed during infection. In addition, compounds can be simultaneously screened for antifungal efficacy and toxicity, which may overcome one of the main obstacles in current antimicrobial discovery. A pilot screen for antifungal compounds using this novel C. elegans system identified 15 compounds that prolonged survival of nematodes infected with the medically important human pathogen Candida albicans. One of these compounds, caffeic acid phenethyl ester (CAPE), was an effective antifungal agent in a murine model of systemic candidiasis and had in vitro activity against several fungal species. Interestingly, CAPE is a potent immunomodulator in mammals with several distinct mechanisms of action. The identification of CAPE in a C. elegans screen supports the hypothesis that this model can identify compounds with both antifungal and host immunomodulatory activity.