Cyanobacteria are infamous producers of toxins. While the toxic potential of planktonic cyanobacterial blooms is well documented, the ecosystem level effects of toxigenic benthic and epiphytic cyanobacteria are an understudied threat. The freshwater epiphytic cyanobacterium Aetokthonos hydrillicola has recently been shown to produce the “eagle killer” neurotoxin aetokthonotoxin (AETX) causing the fatal neurological disease vacuolar myelinopathy. The disease affects a wide array of wildlife in the southeastern United States, most notably waterfowl and birds of prey, including the bald eagle. In an assay for cytotoxicity, we found the crude extract of the cyanobacterium to be much more potent than pure AETX, prompting further investigation. Here, we describe the isolation and structure elucidation of the aetokthonostatins (AESTs), linear peptides belonging to the dolastatin compound family, featuring a unique modification of the C-terminal phenylalanine-derived moiety. Using immunofluorescence microscopy and molecular modeling, we confirmed that AEST potently impacts microtubule dynamics and can bind to tubulin in a similar matter as dolastatin 10. We also show that AEST inhibits reproduction of the nematode Caenorhabditis elegans. Bioinformatic analysis revealed the AEST biosynthetic gene cluster encoding a nonribosomal peptide synthetase/polyketide synthase accompanied by a unique tailoring machinery. The biosynthetic activity of a specific N-terminal methyltransferase was confirmed by in vitro biochemical studies, establishing a mechanistic link between the gene cluster and its product.