A novel bicyclic lactone ''Michelianone'' (P4) has been isolated from anti-inflammatory activity guided fractionation of chloroform extract of Michelia oblonga leaf with a gradient of ethyl acetate in petroleum ether. Further P4 was screened for anti- inflammatory activity on carrageenan and dextran induced inflammation model in rats at the dose level of 50 mg/kg body weight. Treatment of inflammed rats with P4 has showed significant reduction in inflammation caused by carrageenan (P<0.01) and dextran (P<0.05). Hence P4 can be considered as the principle component responsible for the anti- inflammatory activity for Michelia oblonga leaf. The characterization of P4 was done by spectral studies like IR, 1H-NMR, 13C-NMR & Mass Spectroscopy. On the basis of spectral studies the structure of P4 has been elucidated as bicyclic lactone. This is a novel bicyclic lactone isolated from the leaf of M. oblonga for the first time and given a trivial name Michelianone.