The quorum quenching (QQ) activity of endophytic bacteria associated with medicinal plants was explored. Extracts of the Gram-negative Enterobacter sp. CS66 possessed potent N-acylhomoserine lactone (AHL) hydrolytic activity in vitro. Using degenerate primers, we PCR-amplified an open reading frame (denoted aiiE) from CS66 that was 96% identical to the well-characterised AHL-lactonase AiiA from Bacillus thuringiensis, but only 30% was identical to AHL-lactonases from other Gram-negative species. This confirms that close AiiA homologs can be found in both Gram-positive and Gram-negative bacteria. Purified AiiE exhibited potent AHL-lactonase activity against a broad range of AHLs. Furthermore, aiiE was able to reduce the production of secreted plant cell wall-degrading hydrolytic enzymes when expressed in trans in the economically important plant pathogen, Pectobacterium atrosepticum. Our results indicate the presence of a novel AHL-lactonase in Enterobacter sp. CS66 with significant potential as a biocontrol agent.