Physostigmine is a parasympathomimetic drug used to treat a variety of neurological disorders, including Alzheimer’s disease and glaucoma. Because of its potent biological activity and unique pyrroloindole skeleton, physostigmine has been the target of many organic syntheses. However, the biosynthesis of physostigmine has been relatively understudied. In this study, we identified a biosynthetic gene cluster for physostigmine by genome mining. The 8.5 kb gene cluster encodes eight proteins (PsmA–H), seven of which are required for the synthesis of physostigmine from 5-hydroxytryptophan, as shown by in vitro total reconstitution. Further genetic and enzymatic studies enabled us to delineate the biosynthetic pathway for physostigmine. The pathway features an unusual reaction cascade consisting of highly coordinated methylation and acetylation/deacetylation reactions.