This work uses combined quantum mechanical/molecular mechanical and molecular dynamics simulations to investigate the mechanism and selectivity of H2O2-dependent hydroxylation of fatty acids by the P450SPα class of enzymes. H2O2 is found to serve as the surrogate oxidant for generating the principal oxidant, Compound I (Cpd I), in a mechanism that involves homolytic O-O bond cleavage followed by H-abstraction from the Fe-OH moiety. Our results rule out a substrate-assisted heterolytic cleavage of H2O2 en route to Cpd I. We show, however, that substrate binding stabilizes the resultant Fe-H2O2 complex, which is crucial for the formation of Cpd I in the homolytic pathway. A network of hydrogen bonds locks the HO· radical, formed by the O-O homolysis, thus directing it to exclusively abstract the hydrogen atom from Fe-OH, thereby forming Cpd I, while preventing the autoxoidative reaction, with the porphyrin ligand, and the substrate oxidation. The so formed Cpd I subsequently hydroxylates fatty acids at their α-position with S-enantioselectivity. These selectivity patterns are controlled by the active site: substrate's binding by Arg241 determines the α-regioselectivity, while the Pro242 residue locks the prochiral α-CH2, thereby leading to hydroxylation of the pro-S C-H bond. Our study of the mutant Pro242Ala sheds light on potential modifications of the enzyme's active site in order to modify reaction selectivity. Comparisons of P450SPα to P450BM3 and to P450BSβ reveal that function has evolved in these related metalloenzymes by strategically placing very few residues in the active site. © 2016 American Chemical Society.