2,4-Dihydroxyquinoline (DHQ) is an abundant extracellular metabolite of the opportunistic pathogen Pseudomonas aeruginosa that is secreted into growth medium in stationary phase to concentrations comparable with those of the Pseudomonas quinolone signal. Using a combination of biochemical and genetic approaches, we show that PqsD, a condensing enzyme in the pqs operon that is essential for Pseudomonas quinolone signal synthesis, accounts for DHQ formation in vivo. First, the anthraniloyl moiety is transferred to the active-site Cys of PqsD to form an anthraniloyl-PqsD intermediate, which then condenses with either malonyl-CoA or malonyl-acyl carrier protein to produce 3-(2-aminophenyl)-3-oxopropanoyl-CoA. This short-lived intermediate undergoes an intramolecular rearrangement to form DHQ. DHQ was produced by Escherichia coli coexpressing PqsA and PqsD, illustrating that these two proteins are the only factors necessary for DHQ synthesis. Thus, PqsD is responsible for the production of DHQ in P. aeruginosa.