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A unique operon structure has been identified in the genomes of several plant- and insect-associated bacteria. The distinguishing feature of this operon is the presence of tandem hilA and hilB genes encoding dioxygenases belonging to the PF13640 and PF10014 (BsmA) Pfam families, respectively. The genes encoding HilA and HilB from Pantoea ananatis AJ13355 were cloned and expressed in Escherichia coli. The culturing of E. coli cells expressing hilA (E. coli-HilA) or both hilA and hilB (E. coli-HilAB) in the presence of l-isoleucine resulted in the conversion of l-isoleucine into two novel biogenic compounds: l-4'-isoleucine and l-4,4'-dihydroxyisoleucine, respectively. In parallel, two novel enzymatic activities were detected in the crude cell lysates of the E. coli-HilA and E. coli-HilAB strains: l-isoleucine, 2-oxoglutarate: oxygen oxidoreductase (4'-hydroxylating) (HilA) and l-4'-hydroxyisoleucine, 2-oxoglutarate: oxygen oxidoreductase (4-hydroxylating) (HilB), respectively. Two hypotheses regarding the physiological significance of C-4(4')-hydroxylation of l-isoleucine in bacteria are also discussed. According to first hypothesis, the l-isoleucine dihydroxylation cascade is involved in synthesis of dipeptide antibiotic in P. ananatis. Another unifying hypothesis is that the C-4(4')-hydroxylation of l-isoleucine in bacteria could result in the synthesis of signal molecules belonging to two classes: 2(5H)-furanones and analogs of N-acyl homoserine lactone., (© 2013 The Authors. Microbiology Open published by John Wiley & Sons Ltd.)