Lichens are renowned for their diverse natural products though little is known of the genetic programming dictating lichen natural product biosynthesis. We sequenced the genome of Cladonia uncialis and profiled its secondary metabolite biosynthetic gene clusters. Through a homology searching approach, we can now propose specific functions for gene products as well as the biosynthetic pathways that are encoded in several of these gene clusters. This analysis revealed that the lichen genome encodes the required enzymes for patulin and betaenones A-C biosynthesis, fungal toxins not known to be produced by lichens. Within several gene clusters, some (but not all) genes are genetically similar to genes devoted to secondary metabolite biosynthesis in Fungi. These lichen clusters also contain accessory tailoring genes without such genetic similarity, suggesting that the encoded tailoring enzymes perform distinct chemical transformations. We hypothesize that C. uncialis gene clusters have evolved by shuffling components of ancestral fungal clusters to create new series of chemical steps, leading to the production of hitherto undiscovered derivatives of fungal secondary metabolites.