DypB, a dye-decolorizing peroxidase from the lignolytic soil bacterium Rhodococcus jostii RHA1, catalyzes the peroxide-dependent oxidation of divalent manganese (Mn2+), albeit less efficiently than fungal manganese peroxidases. Substitution of Asn246, a distal heme residue, with alanine, increased the enzyme’s apparent kcat and kcat/Km values for Mn2+ by 80- and 15-fold, respectively. A 2.2 Å resolution X-ray crystal structure of the N246A variant revealed the Mn2+ to be bound within a pocket of acidic residues at the heme edge, reminiscent of the binding site in fungal manganese peroxidase and very different to that of another bacterial Mn2+-oxidizing peroxidase. The first coordination sphere was entirely comprised of solvent, consistent with the variant’s high Km for Mn2+ (17 ± 2 mM). N246A catalyzed the manganese-dependent transformation of hard wood kraft lignin and its solvent-extracted fractions. Two of the major degradation products were identified as 2,6-dimethoxybenzoquinone and 4-hydroxy-3,5-dimethoxybenzaldehyde, respectively. These results highlight the potential of bacterial enzymes as biocatalysts to transform lignin.