DypB from Rhodococcus jostii RHA1 is a bacterial dye-decolorizing peroxidase (DyP) that oxidizes lignin and Mn(II). Three residues interact with the iron-bound solvent species in ferric DypB: Asn-246 and the conserved Asp-153 and Arg-244. Substitution of either Asp-153 or Asn-246 with alanine minimally affected the second order rate constant for Compound I formation (k(1) ∼ 10(5) M(-1)s(-1)) and the specificity constant (k(cat)/K(m)) for H(2)O(2). Even in the D153A/N246A double variant, these values were reduced less than 30-fold. However, these substitutions dramatically reduced the stability of Compound I (t(1/2) ∼ 0.13 s) as compared with the wild-type enzyme (540 s). By contrast, substitution of Arg-244 with leucine abolished the peroxidase activity, and heme iron of the variant showed a pH-dependent transition from high spin (pH 5) to low spin (pH 8.5). Two variants were designed to mimic the plant peroxidase active site: D153H, which was more than an order of magnitude less reactive with H(2)O(2), and N246H, which had no detectable peroxidase activity. X-ray crystallographic studies revealed that structural changes in the variants are confined to the distal heme environment. The data establish an essential role for Arg-244 in Compound I formation in DypB, possibly through charge stabilization and proton transfer. The principle roles of Asp-153 and Asn-246 appear to be in modulating the subsequent reactivity of Compound I. These results expand the range of residues known to catalyze Compound I formation in heme peroxidases.