A new strain of Actinomycete (S. albovinaceus) no.10/2 with a broad antifungal and antibacterial activity was isolated from soil sample of Palestine. The medium composition for antibiotic production from strain S.albovinaceus was optimized using shake-flask methodology. The parameters that resulted in maximum antibiotic production are: 1.25 % mannitol and 1 % malt extract were found to be best carbon and nitrogen sources respectively for growth and antifungal and antibacterial production. Similarly initial pH of 7.2, 10 %level of inoculum, incubation period of 96 hrs, and agitation in 250 ml bottom indented flask and medium to flask ratio of 1:10 (aeration) were found to be optimal. Optimization of medium and cultural conditions resulted in good increase in antifungal and antibacterial yield. This is one of the first reports for strain no.10/2(S. albovinaceus) reported from Palestine soil with antibacterial and antifungal activities.