Cereulide synthetase is a two-protein nonribosomal peptide synthetase system that produces a potent emetic toxin in virulent strains of Bacillus cereus. The toxin cereulide is a depsipeptide, as it consists of alternating aminoacyl and hydroxyacyl residues. The hydroxyacyl residues are derived from keto acid substrates, which cereulide synthetase selects and stereospecifically reduces with imbedded ketoreductase domains before incorporating them into the growing depsipeptide chain. We present an in vitro biochemical characterization of cereulide synthetase. We investigate the kinetics and side chain specificity of α-keto acid selection, evaluate the requirement of an MbtH-like protein for adenylation domain activity, assay the effectiveness of vinylsulfonamide inhibitors on ester-adding modules, perform NADPH turnover experiments and evaluate in vitro depsipeptide biosynthesis. This work also provides biochemical insight into depsipeptide-synthesizing nonribosomal peptide synthetases responsible for other bioactive molecules such as valinomycin, antimycin and kutzneride.