Phytochelatins (PCs) are cysteine‐rich peptides that chelate heavy metal ions, thereby mediating heavy metal tolerance in plants, fission yeast, and Caenorhabditis elegans. They are synthesized from glutathione by PC synthase, a specific dipeptidyltransferase. While Saccharomyces cerevisiae synthesizes PCs upon exposure to heavy metal ions, the S. cerevisiae genome does not encode a PC synthase homologue. How PCs are synthesized in yeast is unclear. This study shows that the vacuolar serine carboxypeptidases CPY and CPC are responsible for PC synthesis in yeast. The finding of a PCS‐like activity of these enzymes in vivo discloses another route for PC biosynthesis in eukaryotes.