The biosynthetic gene cluster responsible for the generation of the antibiotic D-cycloserine (DCS) has recently been disclosed. One of the putative enzymes described was DcsC, which showed a high degree of homology to diaminopimelate epimerase (DapF). Based on this homology, the activity of DcsC was presumed to be the racemization of O-ureido-L-serine, a proposed intermediate in DCS biosynthesis. Here we describe the cloning, overexpression and characterization of this enzyme. Using synthetic standards we show that DcsC is a racemase that operates on both O-ureido-L- and D-serine, and that it employs a two-base mechanism, with a thiolate-thiol pair in the active site. The activity of this enzyme was shown to be optimal at pH ~ 7.8, with a similar k(cat)/K(M) ratio in both the L→D direction and D→L direction. Activity was abolished with thiol-inactivating reagents such as iodoacetamide and Hg(2+) ions. Further evidence for a thiolate in the active site was obtained through the use of an epoxide-containing substrate analogue (6), which became covalently attached to the enzyme.