(S)-2-Hydroxypropylphosphonate ((S)-2-HPP) epoxidase (HppE) is a mononuclear non-heme iron-dependent enzyme1,2,3 responsible for the last step in the biosynthesis of the clinically useful antibiotic fosfomycin4. Enzymes of this class typically catalyze oxygenation reactions that proceed via the formation of substrate radical intermediates. In contrast, HppE catalyzes an unusual dehydrogenation reaction while converting the secondary alcohol of (S)-2-HPP to the epoxide ring of fosfomycin1,5. HppE is shown here to also catalyze a biologically unprecedented 1,2-phosphono migration with the alternative substrate (R)-1-HPP. This transformation likely involves an intermediary carbocation based on observations with additional substrate analogues, such as (1R)-1-hydroxy-2-aminopropylphosphonate, and model reactions for both radical- and carbocation-mediated migration. The ability of HppE to catalyze distinct reactions depending on the regio- and stereochemical properties of the substrate is given a structural basis using X-ray crystallography. These results provide compelling evidence for the formation of a substrate-derived cation intermediate in the catalytic cycle of a mononuclear non-heme iron-dependent enzyme. The underlying chemistry of this unusual phosphono migration may represent a new paradigm for the in vivo construction of phosphonate-containing natural products that can be exploited for the preparation of novel phosphonate derivatives.