In many peptide antibiotics, modified amino acids are important for biological activity. The amino acid 3-methyl-glutamic acid (3mGlu) has been found only in three cyclic lipopeptide antibiotics: daptomycin and the A21978C family produced by Streptomyces roseosporus, calcium-dependent antibiotic produced by Streptomyces coelicolor and A54145 produced by Streptomyces fradiae. We studied the non-ribosomal peptide synthetase genes involved in A21978C biosynthesis and the downstream genes, dptG, dptH, dptI and dptJ predicted to encode a conserved protein of unknown function, a thioesterase, a methyltransferase (MTase) and a tryptophan 2,3-dioxygenase respectively. Deletion of dptGHIJ reduced overall lipopeptide yield and led to production of a series of novel A21978C analogues containing Glu12 instead of 3mGlu12. Complementation by only dptI, or its S. coelicolor homologue, glmT, restored the biosynthesis of the 3mGlu-containing compounds in the mutant. Compared with A21978C, the Glu12-containing derivatives were less active against Staphylococcus aureus. Further genetic analyses showed that members of the dptGHIJ locus cooperatively contributed to optimal A21978C production; deletion of dptH, dptI or dptJ genes reduced the yield significantly, while expression of dptIJ or dptGHIJ from the strong ermEp* promoter substantially increased lipopeptide production. The results indicate that these genes play important roles in the biosynthesis of daptomycin, and that dptI encodes a Glu MTase.