In the biosynthesis of actinomycin, the multifunctional actinomycin synthetase II (ACMS II) assembles 4-methyl-3-hydroxyanthranilic acid (4-MHA), L-threonine and D-valine, the first three residues of the 4-MHA peptide lactone chain. ACMS II activates L-threonine and L-valine but not D-valine as thioesters via their adenylates, and there is no epimerization of the covalently bound L-valine. When L-threonine and L-valine are presented to the enzyme together with the 4-MHA analogue p-toluic acid and the 4-MHA-activating enzyme ACMS I, ACMS II forms the two diastereomers p-toluyl-L-Thr-L-Val and p-toluyl-L-Thr-D-Val in equal amounts along with p-toluyl-L-Thr in a cofactor-independent manner. Studies with [2,3-H-3(2)]valine revealed that p-toluyl-L-Thr-D-Val contained approximately 50% of the tritium label found in the LL-diastereomer. Concomitantly, radioactive water was formed due to enzyme-catalyzed hydrogen exchange with the solvent during epimerization. In the absence of threonine (or MgATP), however, the amount of radioactive water formed from [H-3]valine was significantly less, which suggests that the peptide bond between L-threonine and L-valine is formed prior to the epimerization at C-2 of valine. The facts that both LL- and LD-acyldipeptides are equally present on the enzyme's surface-as revealed by using C-14-labeled threonine or valine as precursors-and that the L-valine in the LL-diastereomer apparently has not lost hydrogen strongly suggests that the LL-diastereomer is an obligatory intermediate in the formation of the LD-dipeptide. Accordingly, the loss of hydrogen most likely is the result of epimerization of a peptide rather than of a single amino acid. This mechanism could apply to a large number of peptides containing D-amino acids at positions other than the N-terminus where the corresponding L-amino acids rather than the free D-amino acids are incorporated.