Put 20kg of 4-oxoindole, 4kg of Pd/C catalyst with 5% Pd content (palladium carbon catalyst) and 60L of diethylene glycol dimethyl ether as solvent into a 100L reactor with stirring device, and then heat up the reactor with steam, turn on the stirring, and carry out catalytic dehydrogenation reaction under the condition of T=150~160C. After the dehydrogenation reaction, filter it and separate out the Pd/C catalyst, which can be used for recycling. After the dehydrogenation reaction, filtration, separation of the Pd/C catalyst, separated from the Pd/C catalyst can be recycled, the separation of the filtrate pumped to 100L distillation kettle, distillation under reduced pressure, collection of diethylene glycol dimethyl ether fraction (can continue to use), and then collect the product of 2-methylhydroxyindole fraction of 11kg, the mass yield of 55%, content: 99.0%.