Fredericamycin (FDM) A ( 1), a pentadecaketide featuring two sets of peri-hydroxy tricyclic aromatic moieties connected through a unique asymmetric carbaspiro center, exhibits potent cytotoxicity and represents a novel anticancer drug lead. We have localized previously the fdm gene cluster to a 33 kb DNA segment of Streptomyces griseus ATCC49344, the involvement of which in the biosynthesis of 1 was confirmed by gene inactivation, complementation, and heterologous expression experiments. We now report the isolation and characterization of FDM E ( 5), a heretofore undetected intermediate for 1 biosynthesis from S. griseus, shedding new insight into the mechanism of carbaspirocycle formation. The structure of 5 was elucidated through the combination of spectroscopic methods and isotope-labeling experiments. The core spiro[4.5]decane scaffold of 5 is characterized by a unique cyclohexa-1,2,4-triketone moiety. Transformation of the spiro[4.5]decane 5 into the spiro[4.4]nonane 1 can be rationalized by a biosynthetic benzilic acid-like rearrangement. This unusual rearrangement can be mimicked in vitro by proceeding under aerobic conditions in the absence of enzyme. FDM E displays cytotoxic activity on par with 1 against a selected set of cancer cells, a finding that further supports the unique molecular topology, resulting from the unprecedented carbaspirocycle as exemplified by 1 and 5, as a novel pharmacophore for this family of anticancer agents.