Involved in the biosynthesis of the antibiotic D-cycloserine (DCS), a cyclic structural analog of D-alanine, used as an antitubercular agent. Catalyzes the hydrolysis of N(omega)-hydroxy-L-arginine (NHA) to yield hydroxyurea (HU) and L-ornithine. H2O + N(omega)-hydroxy-L-arginine = hydroxyurea + L-ornithine Cells lacking this gene do not produce cycloserine (DCS). Belongs to the arginase family.