Cysts of Azotobacter vinelandii are resting cells that are surrounded by a protective coat, conferring resistance to various chemical and physical agents. The major chemical components of the cyst coat are alkylresorcinols, which are amphiphilic molecules possessing an aromatic ring with a long aliphatic carbon chain. Although alkylresorcinols are widely distributed in bacteria, fungi, plants, and animals, no enzyme systems for their biosynthesis are known. We report here an ars operon in A. vinelandii that is responsible for the biosynthesis of the alkylresorcinols in the cysts. The ars operon consisted of four genes, two of which encoded a type III polyketide synthase, ArsB and ArsC. In vitro experiments revealed that ArsB and ArsC, sharing 71% amino acid sequence identity, were an alkylresorcinol synthase and an alkylpyrone synthase, respectively, indicating that ArsB and ArsC are not isozymes but enzymatically distinct polyketide synthases. In addition, ArsB and ArsC accepted several acyl-CoAs with various lengths of the side chain as a starter substrate and gave corresponding alkylresorcinols and alkylpyrones, respectively, which suggests that the mode of the ring folding is uninfluenced by the structure of the starter substrates. The importance of the alkylresorcinols for encystment was confirmed by gene inactivation experiments; the lack of alkylresorcinols synthesis caused by ars mutations resulted in the formation of severely impaired cysts, as observed by electron microscopy.