The cell-free extract of an albonoursin-producing strain Streptomyces albulus KO-23 catalyzes the conversion of cyclo(L-Leu-L-Phe) (1) to albonoursin (2). At the early stage of this conversion, two compounds were newly formed prior to albonoursin synthesis in the reaction mixture. These compounds were isolated and identified as (Z)-3-benzylidene-6-isobutyl-2,5-piperazinedione (4) and (Z)-3-benzyl-6-isobutylidene-2,5-piperazinedione (3). The cell-free extract also catalyzed the conversion of compound 3 or 4 to albonoursin. From these results, albonoursin was found to be biosynthesized via these compounds from cyclo(L-Leu-L-Phe). These didehydro diketopiperazines exhibited no inhibitory activity toward the first cleavage of sea urchin embryo in contrast to the higher cytotoxicity for albonoursin, indicating that dehydrogenation at alpha,beta -positions of both amino acid residues in diketopiperazines is required for cytotoxicity.