The cytochromes P450 are heme-dependent enzymes that catalyze many vital reaction processes in the human body related to biodegradation and biosynthesis. They typically act as mono-oxygenases; however, the recently discovered P450 subfamily TxtE utilizes O2 and NO to nitrate aromatic substrates such as L-tryptophan. A direct and selective aromatic nitration reaction may be useful in biotechnology for the synthesis of drugs or small molecules. Details of the catalytic mechanism are unknown, and it has been suggested that the reaction should proceed through either an iron(III)-superoxo or an iron(II)-nitrosyl intermediate. To resolve this controversy, we used stopped-flow kinetics to provide evidence for a catalytic cycle where dioxygen binds prior to NO to generate an active iron(III)-peroxynitrite species that is able to nitrate l-Trp efficiently. We show that the rate of binding of O2 is faster than that of NO and also leads to l-Trp nitration, while little evidence of product formation is observed from the iron(II)-nitrosyl complex. To support the experimental studies, we performed density functional theory studies on large active site cluster models. The studies suggest a mechanism involving an iron(III)-peroxynitrite that splits homolytically to form an iron(IV)-oxo heme (Compound II) and a free NO2 radical via a small free energy of activation. The latter activates the substrate on the aromatic ring, while compound II picks up the ipso-hydrogen to form the product. The calculations give small reaction barriers for most steps in the catalytic cycle and, therefore, predict fast product formation from the iron(III)-peroxynitrite complex. These findings provide the first detailed insight into the mechanism of nitration by a member of the TxtE subfamily and highlight how the enzyme facilitates this novel reaction chemistry.