Cytochromes P450 (CYPs) catalyze various oxidative transformations in drug metabolism, xenobiotic degradation, and natural product biosynthesis. Here we report biochemical, structural, and theoretical studies of TxtC, an unusual bifunctional CYP involved in the biosynthesis of the EPA-approved herbicide thaxtomin A. TxtC was shown to hydroxylate two remote sites within the Phe residue of its diketopiperazine substrate thaxtomin D. The reactions follow a preferred order, with hydroxylation of the α-carbon preceding functionalization of the phenyl group. To illuminate the molecular basis for remote site functionalization, X-ray crystal structures of TxtC in complex with the substrate and monohydroxylated intermediate were determined. Electron density corresponding to a diatomic molecule (probably dioxygen) was sandwiched between the heme iron atom and Thr237 in the TxtC-intermediate structure, providing insight into the mechanism for conversion of the ferrous-dioxygen complex into the reactive ferryl intermediate. The substrate and monohydroxylated intermediate adopted similar conformations in the active site, with the Ï€-face of the phenyl group positioned over the heme iron atom. Docking simulations reproduced this observation and identified a second, energetically similar but conformationally distinct binding mode in which the α-hydrogen of the Phe residue is positioned over the heme prosthetic group. Molecular dynamics simulations confirmed that the α-hydrogen is sufficiently close to the ferryl oxygen atom to be extracted by it and indicated that the two substrate conformations cannot readily interconvert in the active site. These results indicate that TxtC is able to hydroxylate two spatially remote sites by binding distinct conformations of the substrate and monohydroxylated intermediate.