Lolines are potent insecticidal agents produced by endophytic fungi of cool-season grasses. These alkaloids are composed of a pyrrolizidine ring system and an uncommon ether bridge linking carbons 2 and 7. Previous results indicated that 1-aminopyrrolizidine was a pathway intermediate. We used RNA interference to knock down expression of lolO, resulting in the accumulation of an alkaloid identified as exo-1-acetamidopyrrolizidine based on high-resolution MS and NMR. Genomes of endophytes differing in alkaloid profiles were sequenced, revealing that those with mutated lolO accumulated exo-1-acetamidopyrrolizidine but no lolines. Heterologous expression of wild-type lolO complemented a lolO mutant, resulting in the production of N-acetylnorloline. These results indicated that the non-heme iron oxygenase, LolO, is required for ether bridge formation, probably through oxidation of exo-1-acetamidopyrrolizidine.