Activation of the pro-drug isoniazid (INH) as an anti-tubercular drug in Mycobacterium tuberculosis involves its conversion to isonicotinyl-NAD, a reaction that requires the catalase-peroxidase KatG. This report shows that the reaction proceeds in the absence of KatG at a slow rate in a mixture of INH, NAD(+), Mn(2+), and O(2), and that the inclusion of KatG increases the rate by >7 times. Superoxide, generated by either Mn(2+)- or KatG-catalyzed reduction of O(2), is an essential intermediate in the reaction. Elimination of the peroxidatic process by mutation slows the rate of reaction by 60% revealing that the peroxidatic process enhances, but is not essential for isonicotinyl-NAD formation. The isonicotinyl-NAD(*+) radical is identified as a reaction intermediate, and its reduction by superoxide is proposed. Binding sites for INH and its co-substrate, NAD(+), are identified for the first time in crystal complexes of Burkholderia pseudomallei catalase-peroxidase with INH and NAD(+) grown by co-crystallization. The best defined INH binding sites were identified, one in each subunit, on the opposite side of the protein from the entrance to the heme cavity in a funnel-shaped channel. The NAD(+) binding site is approximately 20 A from the entrance to the heme cavity and involves interactions primarily with the AMP portion of the molecule in agreement with the NMR saturation transfer difference results.