Thiopeptides, including micrococcins, are a growing family of bioactive natural products that are ribosomally synthesized and heavily modified. Here we use a refactored, modular in vivo system containing the micrococcin P1 (MP1) biosynthetic genes (TclIJKLMNPS) from Macrococcus caseolyticus str 115 in a genetically tractable Bacillus subtilis strain to parse the processing steps of this pathway. By fusing the micrococcin precursor peptide to an affinity tag and coupling it with catalytically defective enzymes, biosynthetic intermediates were easily captured for analysis. We found that two major phases of molecular maturation are separated by a key C-terminal processing step. Phase-I conversion of six Cys residues to thiazoles (TclIJN) is followed by C-terminal oxidative decarboxylation (TclP). This TclP-mediated oxidative decarboxylation is a required step for the peptide to progress to phase II. In phase II, Ser/Thr dehydration (TclKL) and peptide macrocycle formation (TclM) occurs. A C-terminal reductase, TclS, can optionally act on the substrate peptide, yielding MP1, and is shown to act late in the pathway. This comprehensive characterization of the MP1 pathway prepares the way for future engineering efforts.