γ-Glutamyltranspeptidases (γ-GTs), ubiquitous in glutathione metabolism for γ-glutamyl transfer/hydrolysis, are N-terminal nucleophile (Ntn)-hydrolase fold proteins that share an autoproteolytic process for self-activation. γ-GT homologues are widely present in Gram-positive actinobacteria where their Ntn-hydrolase activities, however, are not involved in glutathione metabolism. Herein, we demonstrate that the formation of 4-Alkyl-L-(dehydro)proline (ALDP) residues, the non-proteinogenic α-amino acids that serve as vital components of many bioactive metabolites found in actinobacteria, involves unprecedented Ntn-hydrolase activity of γ-GT homologue for C-C bond cleavage. The related enzymes share a key Thr residue, which acts as an internal nucleophile for protein hydrolysis and then as a newly released N-terminal nucleophile for carboxylate side-chain processing likely through the generation of an oxalyl-Thr enzyme intermediate. These findings provide mechanistic insights into the biosynthesis of various ALDP residues/associated natural products, highlight the versatile functions of Ntn-hydrolase fold proteins, and particularly generate interest in thus far less-appreciated γ-GT homologues in actinobacteria.