The formation of compound I is the first step in the reaction mechanism of plant heme peroxidases. This intermediate stores two oxidizing equivalents from hydrogen peroxide as an oxyferryl iron center and a radical, either on the porphyrin ring or on a tryptophan residue. Site-directed mutagenesis has proved to be a most useful tool for the identification of the intermediates involved and the resulting nature of the compound I formed. Although there is no doubt that an acid-base mechanism operates in heme peroxidase during the formation of compound I, the roles of several distal pocket residues are currently the subject of intensive research. It is now generally accepted that the conserved distal histidine in the active site of heme peroxidases is the acid-base catalyst that promotes the heterolytic cleavage of hydrogen peroxide. Other residues, such as the distal arginine and asparagine, participate in a range of roles assisting catalysis by the distal histidine. Recent advances in the elucidation of the mechanism at the molecular level are discussed. Another aspect related to the nature of compound I is the location of the radical center. Novel radical species have been detected in the reactions of ascorbate peroxidase, lignin peroxidase and several mutants of horseradish peroxidase. Detailed kinetic and spectroscopic studies of these radical species have provided important insights about the factors that control porphyrin-protein radical exchange. The wide range of data being obtained on compound I will lead to an understanding of its vital function in peroxidase catalysis and the physiological roles played by these enzymes.