The potential of natural products as pharmaceutical and agricultural agents is based on their large structural diversity, resulting in part from modifications of the backbone structure by tailoring enzymes during biosynthesis. Flavin-dependent monooxygenases (FMOs), as one such group of enzymes, play an important role in the biosynthesis of diverse natural products, including cyclodipeptide (CDP) derivatives. The FMO PboD was shown to catalyze C-3 hydroxylation at the indole ring of cyclo-l-Trp-l-Leu in the biosynthesis of protubonines, accompanied by pyrrolidine ring formation. PboD substrate promiscuity was investigated in this study by testing its catalytic activity toward additional tryptophan-containing CDPs in vitro and biotransformation in Aspergillus nidulans transformants bearing a truncated protubonine gene cluster with pboD and two acetyltransferase genes. High acceptance of five CDPs was detected for PboD, especially of those with a second aromatic moiety. Isolation and structure elucidation of five pyrrolidine diketopiperazine products, with two new structures, proved the expected stereospecific hydroxylation and pyrrolidine ring formation. Determination of kinetic parameters revealed higher catalytic efficiency of PboD toward three CDPs consisting of aromatic amino acids than of its natural substrate cyclo-l-Trp-l-Leu. In the biotransformation experiments with the A. nidulans transformant, modest formation of hydroxylated and acetylated products was also detected.