Phenazines are bacterial virulence and survival factors with important roles in infectious disease. PhzF catalyzes a key reaction in their biosynthesis by isomerizing (2 S,3 S)-2,3-dihydro-3-hydroxy anthranilate (DHHA) in two steps, a [1,5]-hydrogen shift followed by tautomerization to an aminoketone. While the [1,5]-hydrogen shift requires the conserved glutamate E45, suggesting acid/base catalysis, it also shows hallmarks of a sigmatropic rearrangement, namely the suprafacial migration of a non-acidic proton. To discriminate these mechanistic alternatives, we employed enzyme kinetic measurements and computational methods. Quantum mechanics/molecular mechanics (QM/MM) calculations revealed that the activation barrier of a proton shuttle mechanism involving E45 is significantly lower than that of a sigmatropic [1,5]-hydrogen shift. QM/MM also predicted a large kinetic isotope effect, which was indeed observed with deuterated substrate. For the tautomerization, QM/MM calculations suggested involvement of E45 and an active site water molecule, explaining the observed stereochemistry. Because these findings imply that PhzF can act only on a limited substrate spectrum, we also investigated the turnover of DHHA derivatives, of which only O-methyl and O-ethyl DHHA were converted. Together, these data reveal how PhzF orchestrates a water-free with a water-dependent step. Its unique mechanism, specificity and essential role in phenazine biosynthesis may offer opportunities for inhibitor development.