Members of the genera Xenorhabdus and Photorhabdus are capable of producing a huge repertoire of different natural products to support a complex life cycle involving insect pathogenesis and nematode symbiosis. Many of the natural products have direct functions, specifically targeting different facets of nematode development or the insect immune system. These adaptations have allowed the bacteria to thrive in a unique environment and become highly efficient, versatile insect pathogens. Here, we discuss the ecological advantages afforded to the bacteria by the acquisition of the gene clusters responsible for producing this repertoire of chemical compounds.