Tenuazonic acid (TeA) is a well-known mycotoxin produced by various plant pathogenic fungi. However, its biosynthetic gene has been unknown to date. Here we identify the TeA biosynthetic gene from Magnaporthe oryzae by finding two TeA-inducing conditions of a low-producing strain. We demonstrate that TeA is synthesized from isoleucine and acetoacetyl-coenzyme A by TeA synthetase 1 (TAS1). TAS1 is a unique non-ribosomal peptide synthetase and polyketide synthase (NRPS-PKS) hybrid enzyme that begins with an NRPS module. In contrast to other NRPS/PKS hybrid enzymes, the PKS portion of TAS1 has only a ketosynthase (KS) domain and this domain is indispensable for TAS1 activity. Phylogenetic analysis classifies this KS domain as an independent clade close to type I PKS KS domain. We demonstrate that the TAS1 KS domain conducts the final cyclization step for TeA release. These results indicate that TAS1 is a unique type of NRPS-PKS hybrid enzyme.