The biochemical route for the formation of the phosphodiester bond in coenzyme F(420), one of the methanogenic coenzymes, has been established in the methanoarchaea Methanosarcina thermophila and Methanococcus jannaschii. The first step in the formation of this portion of the F(420) structure is the GTP-dependent phosphorylation of L-lactate to 2-phospho-L-lactate and GDP. The 2-phospho-L-lactate represents a new natural product that was chemically identified in Methanobacterium thermoautotrophicum, M. thermophila, and Mc. jannaschii. Incubation of cell extracts of both M. thermophila and Mc. jannaschii with [hydroxy-(18)O, carboxyl-(18)O(2)]lactate and GTP produced 2-phospho-L-lactate with the same (18)O distribution as found in both the starting lactate and the lactate recovered from the incubation. These results indicate that the carboxyl oxygens are not involved in the phosphorylation reaction. Incubation of Sephadex G-25 purified cell extracts of M. thermophila or Mc. jannaschii with 7,8-didemethyl-8-hydroxy-5-deazariboflavin (Fo), 2-phospho-L-lactate, and GTP or ATP lead to the formation of F(420)-0 (F(420) with no glutamic acids). This transformation was shown to involve two steps: (i) the GTP- or ATP-dependent activation of 2-phospho-L-lactate to either lactyl(2)diphospho-(5')guanosine (LPPG) or lactyl(2)diphospho-(5')adenosine (LPPA) and (ii) the reaction of the resulting LPPG or LPPA with Fo to form F(420)-0 with release of GMP or AMP. Attempts to identify LPPG or LPPA intermediates by incubation of cell extracts with L-[U-(14)C]lactate, [U-(14)C]2-phospho-L-lactate, or [8-(3)H]GTP were not successful owing to the instability of these compounds toward hydrolysis. Synthetically prepared LPPG and LPPA had half-lives of 10 min at 50 degrees C (at pH 7.0) and decomposed into GMP or AMP and 2-phospho-L-lactate via cyclic 2-phospho-L-lactate. No evidence for the functioning of the cyclic 2-phospho-L-lactate in the in vitro biosynthesis could be demonstrated. Incubation of cell extracts of M. thermophila or Mc. jannaschii with either LPPG or LPPA and Fo generated F(420)-0. In summary, this study demonstrates that the formation of the phosphodiester bond in coenzyme F(420) follows a reaction scheme like that found in one of the steps of the DNA ligase reaction and in the biosynthesis of coenzyme B(12) and phospholipids.