An enzyme fraction most probably involved in the biosynthesis of cyclosporin A was purified 540-fold from Tolypocladium inflatum. The enzyme was capable of forming covalent enzyme-substrate complexes and catalyzed the ATP-pyrophosphate exchange reactions dependent on the unmethylated constituent amino acids of cyclosporin A. Evidence was obtained that covalent binding of substrate amino acids occurred via thioester linkage. Furthermore, the N-methylation of thio-esterified valine, leucine, and glycine residues with S-adenosyl-L-methionine was demonstrated. De novo synthesis of cyclosporin A was not observed but the formation of the diketopiperazine cyclo-(D-Ala-MeLeu) from D-alanine and L-leucine under the consumption of ATP and S-adenosyl-L-methionine. This cyclodipeptide represents a partial sequence of cyclosporin A. Molecular mass determinations revealed the enzyme activity to be lying in the range of about 700 kDa.