Prolyl-4-hydroxylase (P4H) is a non-heme iron hydroxylase that regio- and stereospecifically hydroxylates proline residues in a peptide chain into R-4-hydroxyproline, which is essential for collagen cross-linking purposes in the human body. Surprisingly, in P4H, a strong aliphatic C-H bond is activated, while thermodynamically much weaker aliphatic C-H groups, that is, at the C3 and C5 positions, are untouched. Little is known on the origins of the high regio- and stereoselectivity of P4H and many non-heme and heme enzymes in general, and insight into this matter may be relevant to Biotechnology as well as Drug Development. The active site of the protein contains two aromatic residues (Tyr140 and Trp243) that we expected to be crucial for guiding the regioselectivity of the reaction. We performed a detailed quantum mechanics/molecular mechanics (QM/MM) and molecular dynamics (MD) study on wild-type and mutant structures. The work shows that Trp243 is involved in key protein loop-loop interactions that affect the shape and size of the substrate binding pocket and its mutation has major long-range effects. By contrast, the Tyr140 residue is shown to guide the regio- and stereoselectivity by holding the substrate and ferryl oxidant in a specific orientation through hydrogen bonding and π-stacking interactions. Compelling evidence is found that the Tyr140 residue is involved in expelling the product from the binding pocket after the reaction is complete. It is shown that mutations where the hydrogen bonding network that involves the Tyr140 and Trp243 residues is disrupted lead to major changes in folding of the protein and the size and shape of the substrate binding pocket. Specifically, the Trp243 residue positions the amino acid side chains of Arg161 and Glu127 in specific orientations with substrate. As such, the P4H enzyme is a carefully designed protein with a subtle and rigid secondary structure that enables the binding of substrate, guides the regioselectivity, and expels product efficiently.