Xiamycin A (XMA) and oxiamycin (OXM) are bacterial indolosesquiterpenes featuring rare pentacyclic ring systems and are isolated from a marine-derived Streptomyces sp. SCSIO 02999. The putative biosynthetic gene cluster for XMA/OXM was identified by a partial genome sequencing approach. Eighteen genes were proposed to be involved in XMA/OXM biosynthesis, including five genes for terpene synthesis via a non-mevalonate pathway, eight genes encoding oxidoreductases, and five genes for regulation and resistance. Targeted disruptions of 13 genes within the xia gene cluster were carried out to probe their encoded functions in XMA/OXM biosynthesis. The disruption of xiaK, encoding an aromatic ring hydroxylase, led to a mutant producing indosespene and a minor amount of XMA. Feeding of indosespene to XMA/OXM nonproducing mutants revealed indosespene as a common precursor for XMA/OXM biosynthesis. Most notably, the flavin dependent oxygenase XiaI was biochemically characterized in vitro to convert indosespene to XMA, revealing an unusual oxidative cyclization strategy tailoring indolosesquiterpene biosynthesis.