An enzyme extract from the phycocyanin-containing unicellular rhodophyte, Cyanidium caldarium, reductively transforms biliverdin IX alpha to phycocyanobilin, the chromophore of phycocyanin, in the presence of NADPH. Unpurified cell extract forms both 3(E)-phycocyanobilin, which is identical to the major pigment that is released from phycocyanin by methanolysis, and 3(Z)-phycocyanobilin, which is obtained as a minor methanolysis product. After removal of low molecular weight material from the cell extract, only 3(Z)-phycocyanobilin is formed. 3(E)-Phycocyanobilin formation from biliverdin IX alpha, and the ability to isomerize 3(Z)-phycocyanobilin to 3(E)-phycocyanobilin, are reconstituted by the addition of glutathione to the incubation mixture. Partially purified protein fractions derived from the initial enzyme extract form 3(Z)-phycocyanobilin plus two additional, violet colored bilins, upon incubation with NADPH and biliverdin IX alpha. Further purified protein fractions produce only the violet colored bilins from biliverdin IX alpha. One of these bilins was identified as 3(Z)-phycoerythrobilin by comparative spectrophotometry, reverse-phase high pressure liquid chromatography, and 1H NMR spectroscopy. A C. caldarium protein fraction catalyzes the conversion of 3(Z)-phycoerythrobilin to 3(Z)-phycocyanobilin. This fraction also catalyzes the conversion of 3(E)-phycoerythrobilin to 3(E)-phycocyanobilin. The conversion of phycoerythrobilins to phycocyanobilins requires neither biliverdin nor NADPH. The synthesis of phycoerythrobilin and its conversion to phycocyanobilin by extracts of C. caldarium, a species that does not contain phycoerythrin, indicates that phycoerythrobilin is a biosynthetic precursor to phycocyanobilin. The enzymatic conversion of the ethylidine group from the Z to the E configuration suggests that the E-isomer is the precursor to the protein-bound chromophore.