<jats:p> <jats:italic>Bacillus subtilis</jats:italic> strain ATCC6633 has been identified as a producer of mycosubtilin, a potent antifungal peptide antibiotic. Mycosubtilin, which belongs to the iturin family of lipopeptide antibiotics, is characterized by a β-amino fatty acid moiety linked to the circular heptapeptide Asn-Tyr-Asn-Gln-Pro-Ser-Asn, with the second, third, and sixth position present in the D-configuration. The gene cluster from <jats:italic>B. subtilis</jats:italic> ATCC6633 specifying the biosynthesis of mycosubtilin was identified. The putative operon spans 38 kb and consists of four ORFs, designated <jats:italic>fenF</jats:italic> , <jats:italic>mycA</jats:italic> , <jats:italic>mycB</jats:italic> , and <jats:italic>mycC</jats:italic> , with strong homologies to the family of peptide synthetases. Biochemical characterization showed that MycB specifically adenylates tyrosine, as expected for mycosubtilin synthetase, and insertional mutagenesis of the operon resulted in a mycosubtilin-negative phenotype. The mycosubtilin synthetase reveals features unique for peptide synthetases as well as for fatty acid synthases: ( <jats:italic>i</jats:italic> ) The mycosubtilin synthase subunit A (MycA) combines functional domains derived from peptide synthetases, amino transferases, and fatty acid synthases. MycA represents the first example of a natural hybrid between these enzyme families. ( <jats:italic>ii</jats:italic> ) The organization of the synthetase subunits deviates from that commonly found in peptide synthetases. On the basis of the described characteristics of the mycosubtilin synthetase, we present a model for the biosynthesis of iturin lipopeptide antibiotics. Comparison of the sequences flanking the mycosubtilin operon of <jats:italic>B. subtilis</jats:italic> ATCC6633, with the complete genome sequence of <jats:italic>B. subtilis</jats:italic> strain 168 indicates that the fengycin and mycosubtilin lipopeptide synthetase operons are exchanged between the two <jats:italic>B. subtilis</jats:italic> strains.