Deoxypodophyllotoxin synthase (DPS), a nonheme Fe(II)/2-oxoglutarate (2OG)-dependent oxygenase, is a key enzyme that is involved in the construction of the fused-ring system in (-)-podophyllotoxin biosynthesis by catalyzing the C-C coupling reaction. However, the mechanistic details of DPS-catalyzed ring formation remain unclear. Herein, our quantum mechanics/molecular mechanics (QM/MM) calculations reveal a novel mechanism that involves the recycling of CO2 (a product of decarboxylation of 2OG) to prevent the formation of hydroxylated byproducts. Our results show that CO2 can react with the FeIII-OH species to generate an unusual FeIII-bicarbonate species. In this way, hydroxylation is avoided by consuming the OH group. Then, the C-C coupling followed by desaturation yields the final product, deoxypodophyllotoxin. This work highlights the crucial role of the CO2 molecule, generated in the crevice between the iron active site and the substrate, in controlling the reaction selectivity.