A plant auxin hormone indole-3-acetic acid (IAA) can be assimilated by bacteria as an energy and carbon source, although no degradation has been reported for indole-3-propionic acid and indole-3-butyric acid. While significant efforts have been made to decipher the Iac (indole-3-acetic acid catabolism)-mediated IAA degradation pathway, a lot of questions remain regarding the mechanisms of individual reactions, involvement of specific Iac proteins, and the overall reaction scheme. This work was aimed at providing new experimental evidence regarding the biodegradation of IAA and its derivatives. Here, it was shown that Caballeronia glathei strain DSM50014 possesses a full iac gene cluster and is able to use IAA as a sole source of carbon and energy. Next, IacE was shown to be responsible for the conversion of 2-oxoindole-3-acetic acid (Ox-IAA) intermediate into the central intermediate 3-hydroxy-2-oxindole-3-acetic acid (DOAA) without the requirement for IacB. During this reaction, the oxygen atom incorporated into Ox-IAA was derived from water. Finally, IacA and IacE were shown to convert a wide range of indole derivatives, including indole-3-propionic acid and indole-3-butyric acid, into corresponding DOAA homologs. This work provides novel insights into Iac-mediated IAA degradation and demonstrates the versatility and substrate scope of IacA and IacE enzymes.