Recombinant Escherichia coli cells expressing phenol hydroxylase (designated as strain PHIND) were used to synthesize chloro-substituted indigoids by the transformation of indoles. The optimal conditions for the biotransformation of 4- and 7-chloroindole were determined by response surface methodology. Biotransformation kinetic assays revealed that strain PHIND showed high catalytic efficiency for 4- and 7-chloroindole. The formation rate of 7,7'-dichloroindigo (1.35 unit/mg cell dry weight) by strain PHIND was 1.14-fold higher than that of 4,4'-dichloroindigo. The intermediates of 7-chloroindole biotransformation were identified by high-performance liquid chromatography-mass spectroscopy, and the biotransformation mechanism was also proposed. These results suggested that there was a potential application of strain PHIND in the biotransformation of chloro-substituted indoles to valuable indigoids.