The two-component flavin-dependent monooxygenases belong to an emerging class of enzymes involved in oxidation reactions in a number of metabolic and biosynthetic pathways in microorganisms. One component is a NAD(P)H:flavin oxidoreductase, which provides a reduced flavin to the second component, the proper monooxygenase. There, the reduced flavin activates molecular oxygen for substrate oxidation. Here, we study the flavin reductase ActVB and ActVA-ORF5 gene product, both reported to be involved in the last step of biosynthesis of the natural antibiotic actinorhodin in Streptomyces coelicolor. For the first time we show that ActVA-ORF5 is a FMN-dependent monooxygenase that together with the help of the flavin reductase ActVB catalyzes the oxidation reaction. The mechanism of the transfer of reduced FMN between ActVB and ActVA-ORF5 has been investigated. Dissociation constant values for oxidized and reduced flavin (FMNox and FMNred) with regard to ActVB and ActVA-ORF5 have been determined. The data clearly demonstrate a thermodynamic transfer of FMNred from ActVB to ActVA-ORF5 without involving a particular interaction between the two protein components. In full agreement with these data, we propose a reaction mechanism in which FMNox binds to ActVB, where it is reduced, and the resulting FMNred moves to ActVA-ORF5, where it reacts with O2 to generate a flavinperoxide intermediate. A direct spectroscopic evidence for the formation of such species within ActVA-ORF5 is reported.