Flavonoids secreted by host plants activate, in conjunction with the transcriptional activator NodD, nod gene expression of rhizobia resulting in the synthesis of Nod factors, which trigger nodule organogenesis. Interestingly, addition of inducing flavonoids also stimulates the production of the phytohormone indole-3-acetic acid (IAA) in several rhizobia. Here, the molecular basis of IAA synthesis in Rhizobium sp. NGR234 was investigated. Mass spectrometric analysis of culture supernatants indicated that NGR234 is capable of synthesizing IAA via three different pathways. The production of IAA is increased strongly by exposure of NGR234 to daidzein in a NodD1-, NodD2-, and SyrM2-dependent manner. This suggests that the y4wEFG locus that is downstream of nod-box NB15 encodes proteins involved in IAA synthesis. Knockout mutations in y4wE and y4wF abolished flavonoid-inducible IAA synthesis and a functional y4wF was required for constitutive IAA production. The promoter activity of NB15 and IAA production both were enhanced by introduction of a multicopy plasmid carrying nodD2 into NGR234. Surprisingly, the y4wE mutant still nodulated Vigna unguiculata and Tephrosia vogelii, although the nodules contained less IAA and IAA conjugates than those formed by the wild-type bacterium.