The core of the loline family of insecticidal alkaloids is the bicyclic pyrrolizidine unit with an additional strained ether bridge between carbons 2 and 7. Previously reported genetic and in vivo biochemical analyses showed that the presumptive iron- and 2-oxoglutarate-dependent (Fe/2OG) oxygenase, LolO, is required for installation of the ether bridge upon the pathway intermediate, 1- exo-acetamidopyrrolizidine (AcAP). Here we show that LolO is, in fact, solely responsible for this biosynthetic four-electron oxidation. In sequential 2OG- and O2-consuming steps, LolO removes hydrogens from C2 and C7 of AcAP to form both carbon-oxygen bonds in N-acetylnorloline (NANL), the precursor to all other lolines. When supplied with substoichiometric 2OG, LolO only hydroxylates AcAP. At higher 2OG:AcAP ratios, the enzyme further processes the alcohol to the tricyclic NANL. Characterization of the alcohol intermediate by mass spectrometry and nuclear magnetic resonance spectroscopy shows that it is 2- endo-hydroxy-1- exo-acetamidopyrrolizidine (2- endo-OH-AcAP). Kinetic and spectroscopic analyses of reactions with site-specifically deuteriated AcAP substrates confirm that the C2-H bond is cleaved first and that the responsible intermediate is, as expected, an FeIV-oxo (ferryl) complex. Analyses of the loline products from cultures fed with stereospecifically deuteriated AcAP precursors, proline and aspartic acid, establish that LolO removes the endo hydrogens from C2 and C7 and forms both new C-O bonds with retention of configuration. These findings delineate the pathway to an important class of natural insecticides and lay the foundation for mechanistic dissection of the chemically challenging oxacyclization reaction.