This study elucidates the role of the protein structure in the catalysis of β-diketone cleavage at the three-histidine metal center of diketone cleaving enzyme (Dke1) by computational methods in correlation with kinetic and mutational analyses. Molecular dynamics simulations, using quantum mechanically deduced parameters for the nonheme Fe(II) cofactor, were performed and showed a distinct organization of the hydrophilic triad in the free and substrate-ligated wild-type enzyme. It is shown that in the free species, the Fe(II) center is coordinated to three histidines and one glutamate, whereas the substrate-ligated, catalytically competent enzyme-substrate complex has an Fe(II) center with three-histidine coordination, with a small fraction of three-histidine, one-glutamate coordination. The substrate binding modes and channels for the traffic of water and ligands (2,4-pentandionyl anion, methylglyoxal, and acetate) were identified. To characterize the impact of the hydrophobic protein environment around the metal center on catalysis, a set of hydrophobic residues close to the active site were targeted. The variations resulted in an up to tenfold decrease of the O(2) reduction rates for the mutants. Molecular dynamics studies revealed an impact of the hydrophobic residues on the substrate stabilization in the active site as well as on the orientations of Glu98 and Arg80, which have previously been shown to be crucial for catalysis. Consequently, the Glu98-His104 interaction in the variants is weaker than in the wild-type complex. The role of protein structure in stabilizing the primary O(2) reduction step in Dke1 is discussed on the basis of our results.