The properties of the haem environment of an extracellular peroxidase from Pleurotus ostreatus were studied by electronic absorption spectroscopy. A high-spin ferric form was predominant in the native enzyme and a high-spin ferrous form in the reduced enzyme. Cyanide was readily bound to the haem iron in the native form, thereby changing the enzyme to a low-spin cyano adduct. The electronic absorption spectra of the enzyme were similar to those of lignin peroxidase from Phanerochaete chrysosporium. Compound III of the enzyme was formed after the addition of an excess of H2O2 to the native enzyme, and thereafter spontaneously reverted to the native form. The enzyme oxidized 1-(3,5-dimethoxy-4-hydroxyphenyl)-2-(2-methoxyphenoxy)-1,3-dihydroxyp ropane in the presence of H2O2 to produce 1-(3,5-dimethoxy-4-hydroxyphenyl)-2-(2-methoxyphenoxy)-1-oxo-3-hydroxypr opane , 2,6-dimethoxyhydroquinone, 2-(2-methoxyphenoxy)-3-hydroxypropanal, 2-(2-methoxyphenoxy)-3-hydroxypropanoic acid, 2,6-dimethoxy-1,4-benzoquinone and guaiacol. A similar oxidation pattern was demonstrated with a one-electron oxidant, ammonium cerium(IV)nitrate. Free radicals were detected as intermediates of the enzyme-mediated oxidation of 1-(3,5-dimethoxy-5-hydroxyphenyl)-2-(2-methoxyphenoxy)-1,3-dihydroxyp ropane and acetosyringone. These results can be explained by the mechanisms involving an initial one-electron oxidation of the lignin substructure. This radical may undergo C alpha-C beta cleavage, C alpha-oxidation and alkyl-phenyl cleavage.