Benzylthiocrellidone, a novel thioether which incorporates a 5,5-dimethylcyclohexane-l,3-dione (dimedone) moiety, has been isolated from the red, encrusting marine sponge Crella spinulata collected during the reproductive season October-December 1993-1994 from the Davies and Bowden Reefs, on the Great Barrier Reef, Australia. A partial structure for the novel metabolite, which shows strong UV A and B absorption, was deduced on the basis of chemical and spectroscopic analysis and the synthesis of a degradation product. A single crystal X-ray analysis established the structure (1) for the natural product. In addition to the presence of benzylthiocrellidone, the gravid animals collected during the reproductive seasons had a strong smell of reduced sulphur compounds due to the presence of benzyl mercaptan. Dibenzyl disulphide, the oxidized product of benzyl mercaptan, was also isolated from the sponge; animals collected during other months of the year contained only a red pigment. This is the first report of a natural product containing a dimedone moiety.