Lantibiotics are gene-encoded peptides that contain intramolecular ring structures, introduced through the thioether containing lanthionine and methyllanthionine residues. The overwhelming majority of the lantibiotics shows antibacterial activity. Some lantibiotics, e.g. nisin, are characterized by a dual mode of action. These peptides form a complex with the ultimate cell wall precursor lipid II, thereby inhibiting cell wall biosynthesis. The complexes then aggregate, incorporate further peptides and form a pore in the bacterial membrane. Recent results show that complexing of lipid II is widespread among lantibiotics; however, pore formation depends on the overall length of the peptide and the lipid composition of the test strain membrane. In the two-component system of lacticin 3147, the two functions are performed by the two different peptides. The genetic information for production of lantibiotics is organized in gene clusters which contain a structural gene (lanA) for the lantibiotic prepeptide. The modifications are introduced by one biosynthetic enzyme (LanM) or a combination of a dehydratase (LanB) and a cyclase (LanC). These enzymes have been in the focus of recent bioengineering studies: The structure of NisC has been resolved, the reaction mechanism of LctM was elucidated and the active site residues were characterized by mutagenesis studies. In vitro modification systems have successfully been used to introduce thioether rings into other biologically active peptides. Furthermore, variant lantibiotics with enhanced properties have been engineered and at least one promising new lantibiotic with strong activity against multiresistant pathogens has been described.