Mycobacterium tuberculosis’s (Mtb) success as a pathogen is due in part to its sophisticated lipid metabolic programs, both catabolic and biosynthetic. Several of Mtb lipids have specific roles in pathogenesis, but the identity and roles of many are unknown. Here, we demonstrated that the tyz gene cluster in Mtb, previously implicated in resistance to oxidative stress and survival in macrophages, encodes the biosynthesis of acyl-oxazolones. Heterologous expression of tyzA (Rv2336), tyzB (Rv2338c) and tyzC (Rv2337c) resulted in the biosynthesis of C12:0-tyrazolone as the predominant compound, and the C12:0-tyrazolone was identified in Mtb lipid extracts. TyzA catalyzed the N-acylation of l-amino acids, with highest specificity for l-Tyr and l-Phe and lauroyl-CoA (kcat/KM = 5.9 ± 0.8 × 10^3 M-1s-1). In cell extracts, TyzC, a flavin-dependent oxidase (FDO) of the nitroreductase (NTR) superfamily, catalyzed the O2-dependent desaturation of the N-acyl-L-Tyr produced by TyzA, while TyzB, a ThiF homolog, catalyzed its ATP-dependent cyclization. The substrate preference of TyzB and TyzC appear to determine the identity of the acyl-oxazolone. Phylogenetic analyses revealed that the NTR superfamily includes a large number of broadly distributed FDOs, including five in Mtb that likely catalyze the desaturation of lipid species. Finally, TCA1, a molecule with activity against drug-resistant and persistent tuberculosis, failed to inhibit the cyclization activity of TyzB, the proposed secondary target of TCA1. Overall, this study identifies a novel class of Mtb lipids, clarifies the role of a potential drug target, and expands our understanding of the NTR superfamily.