The paraherquamides are potent anthelmintic natural products with complex heptacyclic scaffolds. One key feature of these molecules is the spiro-oxindole moiety that lends a strained three-dimensional architecture to these structures. The flavin monooxygenase PhqK was found to catalyze spirocycle formation through two parallel pathways in the biosynthesis of paraherquamides A and G. Two new paraherquamides (K and L) were isolated from a Delta phqK strain of Penicillium simplicissimum, and subsequent enzymatic reactions with these compounds generated two additional metabolites, paraherquamides M and N. Crystal structures of PhqK in complex with various substrates provided a foundation for mechanistic analyses and computational studies. While it is evident that PhqK can react with various substrates, reaction kinetics and molecular dynamics simulations indicated that the dioxepin-containing paraherquamide L is the favored substrate. Through this effort, we have elucidated a key step in the biosynthesis of the paraherquamides and provided a rationale for the selective spirocyclization of these powerful anthelmintic agents.