(+/-)-Penindolenes A-D (1-4), the first representatives of indole terpenoids featuring a gamma-lactam skeleton, were isolated from the mangrove-derived endophytic fungus Penicillium brocae MA-231. Our bioactivity tests revealed their potent antimicrobial and acetylcholinesterase inhibitory activities. The biosynthetic reactions by the five enzymes PbaABCDE leading to gamma-lactam ring formation were identified with heterologous expression and in vitro enzymatic assays. Remarkably, the cytochrome P450 monooxygenase PbaB and its homolog in Aspergillus oryzae catalyzed the 2,3-cleavage of the indole ring to generate two keto groups in 1. This is the first example of the oxidative cleavage of indole by a P450 monooxygenase. In addition, rare secondary amide bond formation by the glutamine synthetase-like enzyme PbaD was reported. These findings will contribute to the engineered biosynthesis of unnatural, bioactive indole terpenoids.Novel enantiomeric natural indole terpenoids featuring a gamma-lactam skeleton were isolated from a mangrove-derived endophytic fungus. The cytochrome P450 enzyme was identified to catalyze the C2-C3 double bond cleavage of indole ring to generate products with two keto groups during the biosynthesis of gamma-lactam indole terpenoids. This is the first example of the oxidative cleavage of indole by a P450 monooxygenase. image