Fungal reduced polyketides possess diverse structures exploring a broad region of chemical space despite their synthesis by very similar enzymes. Many fungal polyketides are capped by diverse amino acid-derived five-membered rings, the tetramic acids and related pyrrolidine-2-ones. The known tetramic acid synthetase enzymes in fungi contain C-terminal reductive (R) domains that were proposed to release reduced pyrrolidine-2-one intermediates en route to the tetramic acids. To determine the enzymatic basis of pyrrolidine-2-one diversity, we overexpressed equisetin synthetase (EqiS) R domains and analyzed their reactivity with synthetic substrate analogs. We show that the EqiS R domain does not perform a reducing function and does not bind reducing cofactors. Instead, the EqiS R catalyzes a Dieckmann condensation, with an estimated k(at) approximate to 15 s(-1). This role differs from the redox reactions normally catalyzed by short chain dehydrogenase/reductase superfamily enzymes.