Genome mining of biosynthetic pathways with no identifiable core enzymes can lead to discovery of the so-called unknown (biosynthetic route)-unknown (molecular structure) natural products. Here we focused on a conserved fungal biosynthetic pathway that lacks a canonical core enzyme and used heterologous expression to identify the associated natural product, a highly modified cyclo-arginine-tyrosine dipeptide. Biochemical characterization of the pathway led to identification of a new arginine-containing cyclodipeptide synthase (RCDPS), which was previously annotated as a hypothetical protein and has no sequence homology to non-ribosomal peptide synthetase or bacterial cyclodipeptide synthase. RCDPS homologs are widely encoded in fungal genomes; other members of this family can synthesize diverse cyclo-arginine-Xaa dipeptides, and characterization of a cyclo-arginine-tryptophan RCDPS showed that the enzyme is aminoacyl-tRNA dependent. Further characterization of the biosynthetic pathway led to discovery of new compounds whose structures would not have been predicted without knowledge of RCDPS function.