Abstract Rhizonin A and B are hepatotoxic cyclopeptides produced by bacterial endosymbionts ( Mycetohabitans endofungorum ) of the fungus Rhizopus microsporus . Their toxicity critically depends on the presence of 3‐furylalanine (Fua) residues, which also occur in pharmaceutically relevant cyclopeptides of the endolide and bingchamide families. The biosynthesis and incorporation of Fua by non‐ribosomal peptide synthetases (NRPS), however, has remained elusive. By genome sequencing and gene inactivation we elucidated the gene cluster responsible for rhizonin biosynthesis. A suite of isotope labeling experiments identified tyrosine and l ‐DOPA as Fua precursors and provided the first mechanistic insight. Bioinformatics, mutational analysis and heterologous reconstitution identified dioxygenase RhzB as necessary and sufficient for Fua formation. RhzB is a novel type of heme‐dependent aromatic oxygenases (HDAO) that enabled the discovery of the bingchamide biosynthesis gene cluster through genome mining.