Aims To analyse the function of a putative lantibiotic gene cluster of Paenibacillus polymyxa E681 and to characterize its product, paenilan. Methods and Results Comparative analysis of the lantibiotic gene cluster of E681 revealed that the cluster, consisting of 11 open reading frames, is involved in the biosynthesis of a class I lantibiotic. The pnlA gene encoding the prepeptide PnlA was identified and P. polymyxa strain EPT14 producing only paenilan was constructed by knockout of the other five antibiotic biosynthetic gene clusters of E681. Paenilan was purified from EPT14 culture by solvent partitioning, ODS silica gel chromatography and reversed‐phase preparative HPLC. The molecular mass (2510·10 Da) and structure of paenilan analysed by Nanoelectrospray ionization mass spectrometry (MS) and MS/MS showed that paenilan is a novel class I lantibiotic. Paenilan exhibited antimicrobial activity against Gram‐positive bacteria such as Bacillus cereus, Micrococcus luteus and Paenibacillus durus. The paenilan gene is well‐conserved in different Paenibacillus sp. isolated from globally distant places. Conclusions The lantibiotic gene cluster of P. polymyxa E681 was analysed and its product, a novel and useful lantibiotic named paenilan that inhibits the growth of some Gram‐positive bacteria, was characterized. Significance and Impact of the Study Paenibacillus species are a good source of new lantibiotics, and the conservation of the paenilan gene among Paenibacillus sp. implies paenilan has an important function(s) for their survival.