The draft genome sequence of marine Streptomyces olivaceus strain FXJ 7.023 contains a cryptic Type III polyketide synthase (type III PKS) gene cluster, which is similar to the Streptomyces coelicolor THN biosynthesis gene cluster. A putative type III PKS (SoRppA) gene and its adjacent gene for cytochrome P450 158A2 (SoCYP158A2) of this gene cluster were cloned by PCR screening through a fosmid genomic library of S. olivaceus FXJ 7.023. Tandem expression of SoRppA and SoCYP158A2 in Escherichia coli strain BL21 (DE3) plysS resulted in obvious biosynthesis of phenol and indole, while heterologous expression of SoRppA or SoCYP158A2 alone did not. The engineered strain sorppAcyp158a2BL21 showed tolerance to phenol concentration up to 0.75 g/L. Continuous biosynthesis of phenol and indole by the immobilized engineered strain on macroporousresin was achieved, and the productivities of phenol and indole in extractant-free culture in 102 h were 0.08 and 1.525 g/L/h, respectively, with the highest production reached 0.67 and 14.48 g/L, respectively. These results suggest that the engineered strain and immobilized continuous fermentation process may provide potential for "green" production of phenol and indole.