The aminocoumarin antibiotics novobiocin and clorobiocin contain a 3-dimethylallyl-4-hydroxybenzoate (3DMA-4HB) moiety. The biosynthesis of this moiety has now been identified by biochemical and molecular biological studies. CloQ from the clorobiocin biosynthetic gene cluster in Streptomyces roseochromogenes DS 12976 has recently been identified as a 4-hydroxyphenylpyruvate-3-dimethylallyltransferase. In the present study, the enzyme CloR was overexpressed in Escherichia coli, purified, and identified as a bifunctional non-heme iron oxygenase, which converts 3-dimethylallyl-4-hydroxyphenylpyruvate (3DMA-4HPP) via 3-dimethylallyl-4-hydroxymandelic acid (3DMA-4HMA) to 3DMA-4HB by two consecutive oxidative decarboxylation steps. In 18O2 labeling experiments we showed that two oxygen atoms are incorporated into the intermediate 3DMA-4HMA in the first reaction step, but only one further oxygen is incorporated into the final product 3DMA-4HB during the second reaction step. CloR does not show sequence similarity to known oxygenases. It apparently presents a novel member of the diverse family of the non-heme iron (II) and alpha-ketoacid-dependent oxygenases, with 3DMA-4HPP functioning both as an alpha-keto acid and as a hydroxylation substrate. The reaction catalyzed by CloR represents a new pathway for the formation of benzoic acids in nature.