Biological transformations of polyunsaturated fatty acids often lead to chemically unstable products, such as the prostaglandin endoperoxides and leukotriene A(4) epoxide of mammalian biology and the allene epoxides of plants. Here, we report on the enzymatic production of a fatty acid containing a highly strained bicyclic four-carbon ring, a moiety known previously only as a model compound for mechanistic studies in chemistry. Starting from linolenic acid (C18.3omega3), a dual function protein from the cyanobacterium Anabaena PCC 7120 forms 9R-hydroperoxy-C18.3omega3 in a lipoxygenase domain, then a catalase-related domain converts the 9R-hydroperoxide to two unstable allylic epoxides. We isolated and identified the major product as 9R,10R-epoxy-11trans-C18.1 containing a bicyclo[1.1.0]butyl ring on carbons 13-16, and the minor product as 9R,10R-epoxy-11trans,13trans,15cis-C18.omega3, an epoxide of the leukotriene A type. Synthesis of both epoxides can be understood by initial transformation of the hydroperoxide to an epoxy allylic carbocation. Rearrangement to an intermediate bicyclobutonium ion followed by deprotonation gives the bicyclobutane fatty acid. This enzymatic reaction has no parallel in aqueous or organic solvent, where ring-opened cyclopropanes, cyclobutanes, and homoallyl products are formed. Given the capability shown here for enzymatic formation of the highly strained and unstable bicyclobutane, our findings suggest that other transformations involving carbocation rearrangement, in both chemistry and biology, should be examined for the production of the high energy bicyclobutanes.