The ajudazols are antifungal secondary metabolites produced by a hybrid polyketide synthase (PKS)-nonribosomal peptide synthetase (NRPS) multienzyme "assembly line" in the myxobacterium Chondromyces crocatus Cm c5. The most striking structural feature of these compounds is an isochromanone ring system; such an aromatic moiety is only known from two other complex polyketides, the electron transport inhibitor stigmatellin and the polyether lasalocid. The cyclization and aromatization reactions in the stigmatellin pathway are presumed to be catalyzed by a cyclase domain located at the end of the PKS, while the origin of the lasalocid benzenoid ring remains obscure. Notably, the ajudazol biosynthetic machinery does not incorporate a terminal cyclase, but instead a variant thioesterase (TE) domain. Here we present detailed phylogenetic and sequence analysis, coupled with experiments both in vitro and in vivo, that suggest that this TE promotes formation of the isochromanone ring, a novel reaction for this type of domain. As the ajudazol TE has homologues in several other secondary-metabolite pathways, these results are likely to be generalizable.