Lacticin 481 synthetase (LctM) catalyzes the ATP-dependent conversion of a ribosomally synthesized peptide to a polycyclic thioether antibiotic. It is a bifunctional enzyme that dehydrates four Ser/Thr residues to the corresponding dehydro amino acids and catalyzes the conjugate addition of Cys residues to these dehydro residues in a regio- and stereoselective process. We show here that incubation of truncated substrates with LctM results in products that are phosphorylated in the region of dehydration. Furthermore, synthetic peptides containing phosphorylated Ser and/or Thr residues are accepted by the enzyme as substrates resulting in the elimination of phosphate and dehydro amino acid production. This activity is only observed if ADP is added as cosubstrate. These results argue strongly that the enzyme utilizes ATP to phosphorylate the Ser/Thr residues that are targeted for dehydration. ATP does not appear to be required for peptide translocation or cyclization.