The chloroform extract of Cladonia substellata Vainio was assayed against larvae of Aedes aegypti, the mosquito vector of Dengue fever and Artemia salina. The extract was tested at concentrations ranging from 1 to 15 ppm in an aqueous medium for 24 h. LC50 and LC90 were evaluated. Since the chloroform extract proved to be lethal for third to fourth instar larvae, downstream processing was undertaken to purify the active agents in the extract. The major compound in the chloroform extract was purified by crystallization followed by column chromatography to yield yellow crystals. Furthermore, usnic acid (UA) was evaluated for its larvicidal potential. The major compound in the chloroform extract, UA, exhibited LC50 of 6.6 ppm (6.1 to 7.0 ppm). Therefore, UA is most likely the active principle in C. substellata. UA showed to be toxic to A. salina, a reference organism in assays to evaluate the potential toxicity hazard to invertebrates in ecosystems.