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Two proline containing cyclic dipeptides (CDPs), cyclo (L-Pro-L-Tyr) ( 1 ) and cyclo (L-Pro-L-Phe) ( 2 ) were isolated from the fermentation broth of Pseudonocardia endophytica VUK-10 originating from the Nizampatnam mangrove ecosystem on the south coast of Andhra Pradesh, India. The structures of the compounds were established by 1H NMR and 13C NMR spectroscopy, FTIR and EIMS. The antimicrobial and cytotoxic activities of the compounds were tested against a variety of medicinally and agriculturally important bacteria and fungi as well as on the MDA-MB-231, OAW-42, HeLa and MCF-7 human cell lines. Xanthomonas malvacearum was most sensitive toward 1 (MIC 4 μg/ml), whereas compound 2 had good antibacterial activity against Xanthomonas campestris (MIC 8 μg/ml). Fusarium solani was highly sensitive toward 1 (MIC 16 μg/ml). The compounds were cytotoxic against the human cell lines at micro molar concentrations; the highest activity (IC50 < 10 μM) of 1 was recorded against the MDA-MB-231 cancer cell line.