Biosynthesis of the complex diterpenoid antibiotic pleuromutilin relies on a bifunctional (di)terpene synthase, and here site-directed mutagenesis was used to knockout either of the two active sites. This enabled characterization of the novel ring contracted intermediate produced by the initiating class II diterpene cyclase active site. Quantum chemical calculations further indicate the importance of reactant configuration for this intriguing ring rearrangement.