In many microorganisms, the putative orthologs of the Escherichia coli ygbB gene are tightly linked or fused to putative orthologs of ygbP, which has been shown earlier to be involved in terpenoid biosynthesis. The ygbB gene of E. coli was expressed in a recombinant E. coli strain and was shown to direct the synthesis of a soluble, 17-kDa polypeptide. The recombinant protein was found to convert 4-diphosphocytidyl-2C-methyl-D-erythritol 2-phosphate into 2C-methyl-D-erythritol 2,4-cyclodiphosphate and CMP. The structure of the reaction product was established by NMR spectroscopy using (13)C-labeled substrate samples. The enzyme-catalyzed reaction requires Mn(2+) or Mg(2+) but no other cofactors. Radioactivity from [2-(14)C]2C-methyl-D-erythritol 2,4-cyclodiphosphate was diverted efficiently to carotenoids by isolated chromoplasts from Capsicum annuum and, thus, was established as an intermediate in the deoxyxylulose phosphate pathway of isoprenoid biosynthesis. YgbB protein also was found to convert 4-diphosphocytidyl-2C-methyl-D-erythritol into 2C-methyl-D-erythritol 3,4-cyclophosphate. This compound does not serve as substrate for the formation of carotenoids by isolated chromoplasts and is assumed to be an in vitro product without metabolic relevance.