Peptidylglycine alpha-hydroxylating monooxygenase (PHM) is a copper, ascorbate, and molecular oxygen dependent enzyme that plays a key role in the biosynthesis of many peptides. Using site-directed mutagenesis, the catalytic core of PHM was found not to extend beyond Asp359. Shorter PHM proteins were eliminated intracellularly, suggesting that they failed to fold correctly. A set of mutant PHM proteins whose design was based on the structural and mechanistic similarities of PHM and dopamine beta-monooxygenase (D beta M) was characterized. Mutation of Tyr79, the residue equivalent to a p-cresol target in D beta M, to Phe79 altered the kinetic parameters of PHM. Disruption of either His-rich cluster contained within the PHM/D beta M homology domain eliminated activity, while deletion of a third His-rich cluster unique to PHM failed to affect activity; the catalytically inactive mutant PHM proteins still bound to a peptidylglycine substrate affinity resin. EPR and EXAFS studies of oxidized PHM indicate that the active site contains type 2 copper in a tetragonal environment; the copper is coordinated to two to three His and one to two additional O/N ligands, probably solvent, again supporting the structural homology of PHM and D beta M. Mutation of the Met residues common to PHM and D beta M to Ile identified Met314 as critical for catalytic activity.