The 39-kDa Escherichia coli enzyme MccB catalyses a remarkable posttranslational modification of the MccA heptapeptide during the biosynthesis of microcin C7 (MccC7), a 'Trojan horse' antibiotic. The approximately 260-residue C-terminal region of MccB is homologous to ubiquitin-like protein (UBL) activating enzyme (E1) adenylation domains. Accordingly, MccB-catalysed C-terminal MccA-acyl-adenylation is reminiscent of the E1-catalysed activation reaction. However, unlike E1 substrates, which are UBLs with a C-terminal di-glycine sequence, MccB's substrate, MccA, is a short peptide with an essential C-terminal Asn. Furthermore, after an intramolecular rearrangement of MccA-acyl-adenylate, MccB catalyses a second, unique reaction, producing a stable phosphoramidate-linked analogue of acyl-adenylated aspartic acid. We report six-crystal structures of MccB in apo, substrate-, intermediate-, and inhibitor-bound forms. Structural and kinetic analyses reveal a novel-peptide clamping mechanism for MccB binding to heptapeptide substrates and a dynamic-active site for catalysing dual adenosine triphosphate-consuming reactions. The results provide insight into how a distinctive member of the E1 superfamily carries out two-step activation for generating the peptidyl-antibiotic MccC7.