Phytotoxin (Zearalenone) production by Fusarium graminearum isolates, the causal agent of head blight disease of wheat was evaluated using an accurate and sensetive bioassay ethod. The chemical nature of active compounds was determined by TLC and HPLC techniques using pure ZEA as checks. In this study the sensitivity of four yeast species including accharomyces cerevisiae, S carlesbergensis, Kluyvermyces marxianus and Rhodotorula minuta as well as two bacterial species Bacillus subtilis and B. cereus to ZEA was examined. We have stablished a reproducible in vitro system fir toxin production in the laboratory by artificially infecting rice in the husk. To optimize the system, a combination of experiments were conducted using various media (NA, CZ, YPD. YMA), different volume of agar media/ petri dish (4, 6,8 and 10 ml), various pH (4.5, 5, 5.5, 6. 6.5, 7, 7.5 and 8), pre - incubation temperatures (4,8, 20, 35) °C and its duration (0,2 ,4 and 8 hr) and incubation temperatures (20.23,25, 30 and 35) °C. On the basis of these experiments, optimum sensivity of tested microorganisms to toxins was obtained when petri dishes contained 6-8 ml of media with a pH of 7.5 and pre-incubated at 4°C. for 2 -4 hours prior to transferring to 25°C Twenty four hours after incubation, inhibition zone of the cultures containing Z.EA was measured and analysed. Based on the results obtained, Iranian isolates of F. graminearum produced a high amount of ZEA. This was not to be expected since F. graminearum is the most important Fusarium species known to produce this toxin. Results also indicated that of six icroorganisms tested, B. cereus was the most sensitive one to ZEA in which its growth was inhibited at the lowest concentration of 0.2 ppm (pure ZEA toxin from Sigma inhibited the growth of the same organism at 2.5 ppm). This supports the reliability of our bioassay system specially in detecting naturally infected kernels. All four yeasts tested in the present study were highly resistant to ZEA. This is the first report on a sensitive bioassay method for evaluation of zearalenone production by F. graminearum isolates in Iran.