HSAF is an antifungal natural product with a new mode of action. A rare bacterial iterative PKS-NRPS assembles the HSAF skeleton. The biochemical characterization of the NRPS revealed that the thioesterase (TE) domain possesses the activities of both a protease and a peptide ligase. Active site mutagenesis, circular dichroism spectra, and homology modeling of the TE structure suggested that the TE may possess uncommon features that may lead to the unusual activities. The iterative PKS-NRPS is found in all polycyclic tetramate macrolactam gene clusters, and the unusual activities of the TE may be common to this type of hybrid PKS-NRPS.