Linking bioactive compounds to their cellular targets is a central challenge in chemical biology. Here we report the mode of action of theonellamides, bicyclic peptides derived from marine sponges. We generated a chemical-genomic profile of theonellamide F using a collection of fission yeast strains in which each open reading frame (ORF) is expressed under the control of an inducible promoter. Clustering analysis of the Gene Ontology (GO) terms associated with the genes that alter drug sensitivity suggested a mechanistic link between theonellamide and 1,3-beta-D-glucan synthesis. Indeed, theonellamide F induced overproduction of 1,3-beta-D-glucan in a Rho1-dependent manner. Subcellular localization and in vitro binding assays using a fluorescent theonellamide derivative revealed that theonellamides specifically bind to 3beta-hydroxysterols, including ergosterol, and cause membrane damage. The biological activity of theonellamides was alleviated in mutants defective in ergosterol biosynthesis. Theonellamides thus represent a new class of sterol-binding molecules that induce membrane damage and activate Rho1-mediated 1,3-beta-D-glucan synthesis.