Reported is the structure and biosynthesis of ansalactam A, an ansamycin class polyketide produced by an unusual modification of the polyketide pathway. This new metabolite, produced by a marine sediment-derived bacterium of the genus Streptomyces, possesses a novel spiro gamma-lactam moiety and a distinctive isobutyryl polyketide fragment observed for the first time in this class of natural products. The structure of ansalactam A was defined by spectroscopic methods including X-ray crystallographic analysis. Biosynthetic studies with stable isotopes further led to the discovery of a new, branched chain polyketide synthase extender unit derived from (E)-4-methyl-2-pentenoic acid for polyketide assembly observed for the first time in this class of natural products.