Modification of the N- and C-termini of peptides enhances their stability against degradation by exopeptidases. The biosynthetic pathways of many peptidic natural products feature enzymatic modification of their termini, and these enzymes may represent a valuable pool of biocatalysts. The lantibiotic cacaoidin carries an N,N-dimethylated N-terminal amine group. Its biosynthetic gene cluster encodes the putative methyltransferase Cao4. In this work, we present reconstitution of the activity of the enzyme, which we termed CaoSC following standardized lanthipeptide nomenclature, using a heterologously produced peptide as the model substrate. In vitro methylation of diverse lanthipeptides revealed the substrate requirements of CaoSC. The enzyme accepts peptides of varying lengths and C-terminal sequences but requires dehydroalanine or dehydrobutyrine at the second position. CaoSC-mediated dimethylation of natural lantibiotics resulted in modestly enhanced antimicrobial activity of the lantibiotic haloduracin compared to that of the native compound. Improved activity and/or metabolic stability as a result of methylation illustrates the potential future application of CaoSC in the bioengineering of therapeutic peptides.