Hydroxyethylphosphonate dioxygenase (HEPD) is a mononuclear nonheme iron enzyme that utilizes an O(2) molecule to cleave a C-C bond in 2-hydroxyethylphosphonate and produce hydroxymethylphosphonate (HMP) and formic acid. Density functional theory calculations were performed on an enzyme active-site model of HEPD to understand its catalytic mechanism. The reaction starts with H-abstraction from the C2 position of 2-HEP by a ferric superoxide-type (Fe(III)-OO(•-)) intermediate, in a similar manner to the H-abstraction in the reaction of the dinuclear iron enzyme myo-inositol oxygenase. The resultant Fe(II)-OOH intermediate may follow either a hydroperoxylation or hydroxylation pathway, the former process being energetically more favorable. In the hydroperoxylation pathway, a ferrous-alkylhydroperoxo intermediate is formed, and then its O-O bond is homolytically cleaved to yield a complex of ferric hydroxide with a gem-diol radical. Subsequent C-C bond cleavage within the gem-diol leads to formation of an R-CH(2)(•) species and one of the two products (i.e., formic acid). The R-CH(2)(•) then intramolecularly forms a C-O bond with the ferric hydroxide to provide the other product, HMP. The overall reaction pathway does not require the use of a high-valent ferryl intermediate but does require ferric superoxide and ferric hydroxide intermediates.