Lasso peptides are a class of bioactive ribosomally synthesized and post-translationally modified peptides (RiPPs), with a threaded knot structure that is formed by an isopeptide bond attaching the N-terminus of the peptide to a side chain carboxylate. Some lasso peptide biosynthetic clusters harbor an enzyme that specifically hydrolyzes the isopeptide bond to yield the linear peptide. We describe here the 2.4 Å resolution structure of a lasso peptide isopeptidase revealing a topologically novel didomain architecture consisting of an open β-propeller appended to an α/β hydrolase domain. The 2.2 Å resolution cocrystal structure of an inactive variant in complex with a lasso peptide reveals deformation of the substrate, and reorganization of the enzyme active site, which exposes and orients the isopeptide bond for hydrolysis. Structure-based mutational analysis reveals how this enzyme recognizes the lasso peptide substrate by shape complementarity rather than through sequence specificity. The isopeptidase gene can be used to facilitate genome mining, as a network-based mining strategy queried with this sequence identified 87 putative lasso peptide biosynthetic clusters, 65 of which have not been previously described. Lastly, we validate this mining approach by heterologous expression of two clusters encoded within the genome of Asticcaucalis benevestitus, and demonstrate that both clusters produce lasso peptides.