Bacillus subtilis strain ATCC6633 has been identified as a producer of mycosubtilin, a potent antifungal peptide antibiotic. Mycosubtilin, which belongs to the iturin family of lipopeptide antibiotics, is characterized by a beta-amino fatty acid moiety linked to the circular heptapeptide Asn-Tyr-Asn-Gln-Pro-Ser-Asn, with the second, third, and sixth position present in the D-configuration. The gene cluster from B. subtilis ATCC6633 specifying the biosynthesis of mycosubtilin was identified. The putative operon spans 38 kb and consists of four ORFs, designated fenF, mycA, mycB, and mycC, with strong homologies to the family of peptide synthetases. Biochemical characterization showed that MycB specifically adenylates tyrosine, as expected for mycosubtilin synthetase, and insertional mutagenesis of the operon resulted in a mycosubtilin-negative phenotype. The mycosubtilin synthetase reveals features unique for peptide synthetases as well as for fatty acid synthases: (i) The mycosubtilin synthase subunit A (MycA) combines functional domains derived from peptide synthetases, amino transferases, and fatty acid synthases. MycA represents the first example of a natural hybrid between these enzyme families. (ii) The organization of the synthetase subunits deviates from that commonly found in peptide synthetases. On the basis of the described characteristics of the mycosubtilin synthetase, we present a model for the biosynthesis of iturin lipopeptide antibiotics. Comparison of the sequences flanking the mycosubtilin operon of B. subtilis ATCC6633, with the complete genome sequence of B. subtilis strain 168 indicates that the fengycin and mycosubtilin lipopeptide synthetase operons are exchanged between the two B. subtilis strains.