We have previously proposed that the BlmIV and BlmIII non-ribosomal peptide synthetases are involved in the formation of the bithiazole moiety of the anti-tumor drug bleomycin in Streptomyces verticillus ATCC15003. We report here the identification and characterization of an oxidation domain in BlmIII. The oxidation domain shows local homology to a family of oxidoreductases and is present in all thiazole-forming non-ribosomal peptide synthetase modules known to date. Both the blmIII-Ox domain and blmIII gene were expressed in Escherichia coli, and the resulting BlmIII-Ox and BlmIII proteins were purified to homogeneity. The oxidation domain contains one molar equivalent of non-covalently bound FMN as a prosthetic group. These results provide experimental evidence for an oxidation domain within non-ribosomal peptide synthetases, suggesting that BlmIII-Ox probably catalyzes the thiazoline to thiazole oxidation in bleomycin biosynthesis.