3-Substituted 2-oxindoles are important structural motifs found in many biologically active natural products and pharmaceutical lead compounds. Here, we report an enzymatic formation of the 3-substituted 2-oxindoles catalyzed by MarE in the maremycin biosynthetic pathway in Streptomyces sp. B9173. MarE is a homologue of Fe(II)/heme-dependent tryptophan 2,3-dioxygenases (TDOs). Typical TDOs usually catalyze the insertion of two oxygen atoms from O(2) into an indole ring to generate N-formylkynurenine (NFK)-like products. In contrast, MarE catalyzes the insertion of a single oxygen atom from O(2) into an indole ring, to probably generate an epoxyindole intermediate that undergoes an unprecedented 2,3-hydride migration to form 2-oxindole structure. MarE shows substrate robustness to catalyze the conversion of a series of 3-substituted indoles into their corresponding 3-substituted 2-oxindoles. Although containing most key amino acid residues conserved in well-known TDO homologues, MarE falls into a separate new subgroup in the phylogenetic tree. The characterization of MarE and its homologue enriches the functional diversities of TDO superfamily and provides a new strategy for discovering novel natural products containing 3-substituted 2-oxindole pharmacophores by genome mining.