[reaction: see text] A mutational analysis of the enterocin biosynthesis genes revealed that the putative oxygenase and the methyltransferase gene products EncM and EncK, respectively, jointly catalyze a biosynthetic Favorskii-like rearrangement. Inactivation of either gene terminated enterocin production and caused the accumulation of four nonrearranged, nonmethylated polyketides. The structure elucidation of the new wailupemycins E-G is reported.