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Simple Summary: Verticillium dahliae (Vd) is a kind of soil-borne filamentous fungus that can cause Verticillium wilt in many crops and serious damage to agricultural production. Vd 991 is a main pathogen of cotton Verticillium wilt. Previously, we isolated C17 mycosubtilin from Bacillus subtilis J15 (BS J15) broth and showed a significant inhibitory effect on cotton Verticillium wilt. However, the specific fungistatic mechanism by which C17 mycosubtilin antagonizes Vd 991 is not clear. Here, we found that C17 mycosubtilin inhibited the growth and spore germination of Vd 991. C17 mycosubtilin treatment caused shrinking, sinking, and even damage to spores, resulting in rough deformation and uneven distribution of hyphal contents, damage to the cell membrane and cell wall, and mitochondrial swelling of fungi. Moreover, C17 mycosubtilin induced necrosis of Vd 991 in a time-dependent manner. Differential transcription analysis showed that C17 mycosubtilin inhibited fungal growth mainly by destroying the cell structure, blocking the cell cycle, disturbing substance, energy metabolism, and so on. Our results reveal the potential mechanism by which C17 mycosubtilin antagonizes Vd 991, providing useful information for development of more effective antimicrobials. Verticillium wilt is a kind of soil-borne plant fungal disease caused by Verticillium dahliae (Vd). Vd 991 is a strong pathogen causing cotton Verticillium wilt. Previously, we isolated a compound from the secondary metabolites of Bacillus subtilis J15 (BS J15), which showed a significant control effect on cotton Verticillium wilt and was identified as C17 mycosubtilin. However, the specific fungistatic mechanism by which C17 mycosubtilin antagonizes Vd 991 is not clear. Here, we first showed that C17 mycosubtilin inhibits the growth of Vd 991 and affects germination of spores at the minimum inhibitory concentration (MIC). Morphological observation showed that C17 mycosubtilin treatment caused shrinking, sinking, and even damage to spores; the hyphae became twisted and rough, the surface was sunken, and the contents were unevenly distributed, resulting in thinning and damage to the cell membrane and cell wall and swelling of mitochondria of fungi. Flow cytometry analysis with ANNEXINV-FITC/PI staining showed that C17 mycosubtilin induces necrosis of Vd 991 cells in a time-dependent manner. Differential transcription analysis showed that C17 mycosubtilin at a semi-inhibitory concentration (IC50) treated Vd 991 for 2 and 6 h and inhibited fungal growth mainly by destroying synthesis of the fungal cell membrane and cell wall, inhibiting its DNA replication and transcriptional translation process, blocking its cell cycle, destroying fungal energy and substance metabolism, and disrupting the redox process of fungi. These results directly showed the mechanism by which C17 mycosubtilin antagonizes Vd 991, providing clues for the mechanism of action of lipopeptides and useful information for development of more effective antimicrobials. [ABSTRACT FROM AUTHOR]