The gene cluster from Pantoea agglomerans responsible for biosynthesis of the dapdiamide antibiotics encodes an adenylation-thiolation didomain protein, DdaD, and an Fe(II)/alpha-ketoglutarate-dependent dioxygenase homologue, DdaC. Here we show that DdaD, a nonribosomal peptide synthetase module, activates and sequesters N beta-fumaramoyl-L-2,3-diaminopropionate as a covalently tethered thioester for subsequent oxidative modification of the fumaramoyl group. DdaC catalyzes Fe(II)- and alpha-ketoglutarate-dependent epoxidation of the covalently bound N beta-fumaramoyl-L-2,3-diaminopropionyl-S-DdaD species to generate N beta-epoxysuccinamoyl-DAP (DAP = 2,3-diaminopropionate) in thioester linkage to DdaD. After hydrolytic release, N beta-epoxysuccinamoyl-DAP can be ligated to L-valine by the ATP-dependent ligase DdaF to form the natural antibiotic N beta-epoxysuccinamoyl-DAP-Val.