Hapalindoles are bioactive indole alkaloids with fascinating polycyclic ring systems whose biosynthetic assembly mechanism has remained unknown since their initial discovery in the 1980s. In this study, we describe the fam gene cluster from the cyanobacterium Fischerella ambigua UTEX 1903 encoding hapalindole and ambiguine biosynthesis along with the characterization of two aromatic prenyltransferases, FamD1 and FamD2, and a previously undescribed cyclase, FamC1. These studies demonstrate that FamD2 and FamC1 act in concert to form the tetracyclic core ring system of the hapalindoles from cis-indole isonitrile and geranyl pyrophosphate through a presumed biosynthetic Cope rearrangement and subsequent 6-exo-trig cydization/electrophilic aromatic substitution reaction.