Cyanobacteria are a rich source of natural products with interesting pharmaceutical properties. Here, we report the identification, sequencing, annotation, and biochemical analysis of the nostophycin (npn) biosynthetic gene cluster. The npn gene cluster spans 45.1 kb and consists of three open reading frames encoding a polyketide synthase, a mixed polyketide nonribosomal peptide synthetase, and a nonribosomal peptide synthetase. The genetic architecture and catalytic domain organization of the proteins are colinear in arrangement, with the putative order of the biosynthetic assembly of the cyclic heptapeptide. NpnB contains an embedded monooxygenase domain linking nonribosomal peptide synthetase (NRPS) and polyketide synthase (PKS) catalytic domains and predicted here to hydroxylate the nostophycin during assembly. Expression of the adenylation domains and subsequent substrate specificity assays support the involvement of this cluster in nostophycin biosynthesis. Biochemical analyses suggest that the loading substrate of NpnA is likely to be a phenylpropanoic acid necessitating deletion of a carbon atom to explain the biosynthesis of nostophycin. Biosyntheses of nostophycin and microcystin resemble each other, but the phylogenetic analyses suggest that they are distantly related to one another.