The cyclic depsipeptide skyllamycin A is a potent inhibitor of the platelet-derived growth factor (PDGF) signaling pathway by inhibiting binding of homodimeric PDGF BB to the PDGF β-receptor. Its structure contains a cinnamoyl side chain and shows a high amount of β-hydroxylated amino acids as well as an unusual α-hydroxyglycine moiety as a rare structural modification. The skyllamycin biosynthetic gene cluster was cloned and sequenced from Streptomyces sp. Acta 2897. Its analysis revealed the presence of open reading frames encoding proteins for fatty acid precursor biosynthesis, non-ribosomal peptide synthetases, regulators, and transporters along with other modifying enzymes. Specific in-frame mutagenesis of these tailoring enzymes resulted in the production of novel skyllamycin derivatives revealing that β-hydroxy groups in skyllamycin A are introduced by a promiscuous cytochrome P450 monooxygenase, whereas a two-component flavin-dependent monooxygenase is involved in α-hydroxylation.