Non-ribosomal peptide synthetases are giant enzymes composed of modules that house repeated sets of functional domains, which select, activate and couple amino acids drawn from a pool of nearly 500 potential building blocks. The structurally and stereochemically diverse peptides generated in this manner underlie the biosynthesis of a large sector of natural products. Many of their derived metabolites are bioactive such as the antibiotics vancomycin, bacitracin, daptomycin and the β-lactam-containing penicillins, cephalosporins and nocardicins. Penicillins and cephalosporins are synthesized from a classically derived non-ribosomal peptide synthetase tripeptide (from δ-(L-α-aminoadipyl)-L-cysteinyl-D-valine synthetase). Here we report an unprecedented non-ribosomal peptide synthetase activity that both assembles a serine-containing peptide and mediates its cyclization to the critical β-lactam ring of the nocardicin family of antibiotics. A histidine-rich condensation domain, which typically performs peptide bond formation during product assembly, also synthesizes the embedded four-membered ring. We propose a mechanism, and describe supporting experiments, that is distinct from the pathways that have evolved to the three other β-lactam antibiotic families: penicillin/cephalosporins, clavams and carbapenems. These findings raise the possibility that β-lactam rings can be regio- and stereospecifically integrated into engineered peptides for application as, for example, targeted protease inactivators.