Cyclic dipeptide oxidase is a novel enzyme that specifically catalyzes the formation of alpha,beta-dehydro-Phe (Delta Phe) and alpha,beta-dehydro-Leu (Delta Leu) residues during the biosynthesis of albonoursin, cyclo(Delta Phe-Delta Leu), an antibiotic produced by Streptomyces noursei. It was purified 600-fold with a 30% overall recovery, and consists of the association of a single type of subunit with a relative molecular mass of 21,066 resulting in a large homopolymer of relative molecular mass over 2,000,000. The enzyme exhibits a typical flavoprotein spectrum with maxima at 343.5 and 447.5 nm, the flavin prosthetic group being covalently bound to the protein. The catalytic reaction of the natural substrate cyclo(L-Phe-L-Leu) occurs in a two-step sequential reaction leading first to cyclo(alpha,beta-dehydro-Phe-L-Leu) and finally to albonoursin. Kinetic parameters for the first step were determined (K(m) = 53 microM; k = 0.69 s(-1)). The enzyme was shown to catalyze the conversion of a variety of cyclo(dipeptides) and can be reoxidized at the expense of molecular oxygen by producing H(2)O(2). This reaction mechanism, which differs from those already described for the formation of alpha,beta-dehydro-amino acids, might consist of the transient formation of an intermediate imine followed by its rearrangement into an alpha,beta-dehydro-residue.