<jats:title>Abstract</jats:title><jats:p>Flavin‐dependent monooxygenases are ubiquitous in living systems and are classified into single‐ or two‐component systems. Actinorhodin, produced by <jats:italic>Streptomyces coelicolor</jats:italic>, is a representative polycyclic polyketide that is hydroxylated through the action of the two‐component ActVA‐5/ActVB hydroxylase system. These homologous systems are widely distributed in bacteria, but their reaction mechanisms remain unclear. This in vitro investigation has provided chemical proof of two consecutive hydroxylations via hydroxynaphthalene intermediates involved in actinorhodin biosynthesis. The ActVA‐5 oxygenase component catalyzed a stepwise dihydroxylation of the substrate, whereas the ActVB flavin reductase not only supplied a reduced cofactor, but also regulated the quinone–hydroquinone interconversion of an intermediate. Our study provides clues for understanding the general biosynthetic mechanisms of highly functionalized aromatic natural products with structural diversity.