Isopenicillin N synthase (IPNS) is a non-heme iron(ii)-dependent oxidase that is central to penicillin biosynthesis. Herein, we report mechanistic studies of the IPNS reaction in the crystalline state, using the substrate analogue delta-(L-alpha-aminoadipoyl)-(3R)-methyl-L-cysteine D-alpha-hydroxyisovaleryl ester (AmCOV) to probe the early stages of the catalytic cycle. The X-ray crystal structure of the anaerobic IPNS:Fe(II):AmCOV complex was solved to 1.40 A resolution, and it reveals several subtle differences in the active site relative to the complex of the enzyme with its natural substrate. The crystalline IPNS:Fe(II):AmCOV complex was then exposed to oxygen gas at high pressure; this brought about reaction to give what appears to be a hydroxymethyl/ene-thiol product. A mechanism for this reaction is proposed. These results offer further insight into the delicate interplay of steric and electronic effects in the IPNS active site and the mechanistic intricacies of this remarkable enzyme.