L-delta-(alpha-Aminoadipoyl)-L-cysteinyl-D-valine (ACV) synthetase is probably the simplest known peptide synthetase in terms of the number of reactions catalyzed. In the "thiol-template" proposal for nonribosomal peptide synthesis, a key step is transfer of aminoacyl groups derived from the substrates to enzyme-bound thiols prior to peptide bond formation. No incorporation of 18O was seen in AMP isolated from the reaction mixture when di[18O]valine was incubated with relatively large amounts of active synthetase and MgATP. We therefore utilized di[18O]valine as a substrate for the biosynthesis of the diastereomeric dipeptides L-O-(methylserinyl)-L-valine and L-O-(methylserinyl)-D-valine [Shiau, C.-Y., Baldwin, J. E., Byford, M. F., Sobey, W. J., & Schofield, C. J. (1995) FEBS Lett. 358, 97-100]. In the L-O-(methylserinyl)-L-valine product, no significant loss of 18O was observed. However, in the L-O-(methylserinyl)-D-valine product, a significant loss of one or both 18O labels was observed. Thus, both peptide bond formation and the epimerization of the valine residue can both occur before formation of any thioester bond to the valine carboxylate in the biosynthesis of these dipeptides. The usual qualitative test for thioesterification of substrates to the synthetase, lability of enzyme-bound radiolabeled amino acid to performic acid, proved inconclusive in our hands. These results require a new mechanism for the enzymic synthesis of L-O-(methylserinyl)-L-valine and L-O-(methylserinyl)-D-valine and imply that a revised mechanism for ACV synthesis is also required.