Abstract The oxidation of 3-alkyl benzofurans, indoles, and a benzothiophene by the chloroperoxidase from Caldariomyces fumago has been investigated. Under conditions in which the catalase activity of chloroperoxidase was minimised in the presence of chloride and hydrogen peroxide, 3-methylbenzothiophene was oxidised at sulfur but the indoles (5-9) and benzofurans (1-4) gave 2,3-diols as initial products. In the case of N-unsubstituted indoles, these tautomerised to give the corresponding lactam. In contrast, the diols (predominantly trans) formed from the benzofurans were sufficiently stable for isolation and full characterisation. This novel reaction has the potential to be developed into a useful synthetic biotransformation.