YM-216391, an antitumor natural product, represents a new class of cyclic peptides containing a polyoxazole-thiazole moiety. Herein we describe its gene cluster encoding the biosynthetic paradigm featuring a ribosomally synthesizing precursor peptide followed by a series of novel posttranslational modifications, which include (i) cleavage of both N-terminal leader peptide and C-terminal extension peptide and cyclization in a head-to-tail fashion, (ii) conversion of an L-Ile to D-allo-Ile, and (iii) β-hydroxylation of Phe by a P450 monooxygenase followed by further heterocyclization and oxidation to form a phenyloxazole moiety. The cluster was heterologously expressed in Streptomyces lividans to bypass difficult genetic manipulation. Deletion of the ymR3 gene, encoding a putative transcriptional regulator, increased the YM-216391 yield about 20-fold higher than the original yields for the heterologous expression of wild-type cluster, which set the stage for further combinatorial biosynthesis.