In bacteria, Ser/Thr protein kinase-like sequences are found as part of large multidomain polypeptides that biosynthesize lanthipeptides, a class of natural products distinguished by the presence of thioether cross-links. The kinase domain phosphorylates Ser or Thr residues in the peptide substrates. Subsequent β-elimination by a lyase domain yields electrophilic dehydroamino acids, which can undergo cyclase domain-catalyzed cyclization to yield conformationally restricted, bioactive compounds. Here, we reconstitute the biosynthetic pathway for a class III lanthipeptide from Bacillus thuringiensis NRRL B-23139, including characterization of a two-component protease for leader peptide excision. We also describe the first crystal structures of a class III lanthipeptide synthetase, consisting of the lyase, kinase, and cyclase domains, in various states including complexes with its leader peptide and nucleotide. The structure shows interactions between all three domains that result in an active conformation of the kinase domain. Biochemical analysis demonstrates that the three domains undergo movement upon binding of the leader peptide to establish interdomain allosteric interactions that stabilize this active form. These studies inform on the regulatory mechanism of substrate recognition and provide a framework for engineering of variants of biotechnological interest.