Biocatalysis has become an important method in the pharmaceutical industry for the incorporation of new functionality in small molecules. Currently this method is limited in the types of reactions that can be carried out and no strategy exists to systematically screen for new biocatalyzed reactions. This study involves the development of a medium throughput screen to identify and optimize new reactions using a series of marine-derived bacterial cell lines, which were screened against several C-13 labeled organic substrates. The reactions were analyzed using C-13 NMR as the primary screening tool. We describe the discovery of a bacterial catalyzed indole oxidation reaction in which complete conversion of C-13 labeled N-methyl indole to 3-hydroxyindole was observed. In addition, the sensitivity of this reaction to dO(2) levels can be exploited to oxidize to either 3-hydroxyindole or 2-oxoindole. This new platform sets up an important tool for the discovery of new organic transformations using an extensive library of marine bacteria.