Lysergyl peptide synthetase 1 catalyzes the assembly of toxic ergopeptines from activated D-lysergic acid and three amino acids. The gene encoding this enzyme in the endophytic fungus Neotyphodium lolii was analyzed and compared to a homologous gene from the ergot fungus Claviceps purpurea. Each gene contained two introns, which were found in the same relative position within two modules of the gene. The 5' ends of the two genes were unusually divergent. Signature sequences determining substrate specificity were similar in adenylation domains that recognized identical amino acids but differed within the adenylation domain for the amino acid that varies between the major ergopeptines of the two fungi. Homologues were detected in several related endophytic fungi; the tall fescue endophyte Neotyphodium coenophialum contained a divergent, second copy of the gene. Our results provide new information on the structure and distribution of this important peptide synthetase involved in ergot alkaloid biosynthesis.