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Sponges (Porifera) contain many peptide-specialized metabolites with potent biological activities and significant roles in shaping marine ecology. It is well established that symbiotic bacteria produce bioactive “sponge” peptides, both on the ribosome (RiPPs) and nonribosomally. Here, we demonstrate that sponges themselves also produce many bioactive macrocyclic peptides, such as phakellistatins and related proline-rich macrocyclic peptides (PRMPs). Using theStylissa carterisponge transcriptome, methods were developed to find sequences encoding 46 distinct RiPP-type core peptides, of which ten encoded previously identified PRMP sequences. With this basis set, the genome and transcriptome of the spongeAxinella corrugatawas interrogated to find 35 PRMP precursor peptides encoding 31 unique core peptide sequences. At least 11 of these produced cyclic peptides that were present in the sponge and could be characterized by mass spectrometry, including stylissamides A-D and seven previously undescribed compounds. Precursor peptides were encoded in theA. corrugatagenome, confirming their animal origin. The peptides contained signal peptide sequences and highly repetitive recognition sequence-core peptide elements with up to 25 PRMP copies in a single precursor. In comparison to sponges without PRMPs, PRMP sponges are incredibly enriched in potentially secreted polypeptides, with >23,000 individual signal peptide encoding genes found in a single transcriptome. The similarities between PRMP biosynthetic genes and neuropeptides in terms of their biosynthetic logic suggest a fundamental biology linked to circular peptides, possibly indicating a widespread and underappreciated diversity of signaling peptide post-translational modifications across the animal kingdom.