Abstract Mycophenolic acid (MPA) from filamentous fungi is the first natural product antibiotic in human history and a first-line immunosuppressive drug for organ transplantations and autoimmune diseases. However, its biosynthetic mechanisms have remained a long-standing mystery. Here, we elucidate the MPA biosynthetic pathway that features both compartmentalized enzymatic steps and unique cooperation between biosynthetic and β -oxidation catabolism machineries based on targeted gene inactivation, feeding experiments in heterologous expression hosts, enzyme functional characterization and kinetic analysis, and microscopic observation of protein subcellular localization. Besides identification of the oxygenase MpaB’ as the long-sought key enzyme responsible for the oxidative cleavage of sesquiterpene side chain, we reveal the intriguing pattern of compartmentalization for the MPA biosynthetic enzymes, including the cytosolic polyketide synthase MpaC’ and O -methyltransferase MpaG’, the Golgi apparatus-associated prenyltransferase MpaA’, the endoplasmic reticulum-bound oxygenase MpaB’ and P450-hydrolase fusion enzyme MpaDE’, and the peroxisomal acyl-CoA hydrolase MpaH’. The whole pathway is elegantly co-mediated by these compartmentalized enzymes, together with the peroxisomal β -oxidation machinery. Beyond characterizing the remaining outstanding steps of the MPA biosynthetic pathway, our study highlights the importance of considering subcellular contexts and the broader cellular metabolism in natural product biosynthesis. Significance Statement Here we elucidate the full biosynthetic pathway of the fungal natural product mycophenolic acid (MPA), which represents an unsolved mystery for decades. Besides the intriguing enzymatic mechanisms, we reveal that the MPA biosynthetic enzymes are elegantly compartmentalized; and the subcellular localization of the acyl-CoA hydrolase MpaH’ in peroxisomes is required for the unique cooperation between biosynthetic and β -oxidation catabolism machineries. This work highlights the importance of a cell biology perspective for understanding the unexplored organelle-associated essential catalytic mechanisms in natural product biosynthesis of fungi and other higher organisms. The insights provided by our work will also benefit future efforts for both industrial strain improvement and novel drug development.

Compartmentalized Biosynthesis of Mycophenolic Acid