DypB, a dye-decolorizing peroxidase from the lignolytic soil bacterium Rhodococcus jostii RHA1, catalyzes the peroxide-dependent oxidation of divalent manganese (Mn(2+)), albeit less efficiently than fungal manganese peroxidases. Substitution of Asn246, a distal heme residue, with alanine increased the enzyme's apparent k(cat) and k(cat)/K(m) values for Mn(2+) by 80- and 15-fold, respectively. A 2.2 Å resolution X-ray crystal structure of the N246A variant revealed the Mn(2+) to be bound within a pocket of acidic residues at the heme edge, reminiscent of the binding site in fungal manganese peroxidase and very different from that of another bacterial Mn(2+)-oxidizing peroxidase. The first coordination sphere was entirely composed of solvent, consistent with the variant's high K(m) for Mn(2+) (17 ± 2 mM). N246A catalyzed the manganese-dependent transformation of hard wood kraft lignin and its solvent-extracted fractions. Two of the major degradation products were identified as 2,6-dimethoxybenzoquinone and 4-hydroxy-3,5-dimethoxybenzaldehyde, respectively. These results highlight the potential of bacterial enzymes as biocatalysts to transform lignin.