Cyanobacteria are prolific producers of bioactive natural products that mostly belong to the nonribosomal peptide and polyketide classes. We show here how a linear precursor peptide of microviridin K, a new member of the microviridin class of peptidase inhibitors, is processed to become the mature tricyclic peptidase inhibitor. The microviridin (mvd) biosynthetic gene cluster of P. agardhii comprises six genes encoding microviridin K, an apparently unexpressed second microviridin, two RimK homologues, an acetyltransferase, and an ABC transporter. We have over-expressed three enzymes of this pathway and have demonstrated their biochemical function in vitro through chemical degradation and mass spectrometry. We show that a prepeptide undergoes post-translational modification through cross-linking by ester and amide bond formation by the RimK homologues MvdD and MvdC, respectively. In silico analysis of the mvd gene cluster suggests the potential for widespread occurrence of microviridin-like compounds in a broad range of bacteria.