The oxygenase component (C2) of p-hydroxyphenylacetate (4-HPA) 3-hydroxylase (HPAH) from Acinetobacter baumannii catalyzes the hydroxylation of various phenolic acids. In this report, we found that substitution of a residue close to the phenolic group binding site to yield the S146A variant resulted in an enzyme that is more effective than the wild-type in catalyzing the hydroxylation of 4-aminophenylacetate (4-APA). Product yields for both wild-type and S146A enzymes are better at lower pH values. Multiple turnover reactions of the wild-type and S146A enzymes indicate that both enzymes first hydroxylate 3-APA to give 3-hydroxy-4-aminophenylacetate (3-OH-4-APA), which is further hydroxylated to give 3,5-dihydroxy-4-aminophenylacetate, similar to the reaction of C2 with 4-HPA. Stopped-flow experiments showed that 4-APA can only bind to the wild-type enzyme at pH 6.0 and not at pH 9.0, while it can bind to S146A under both pH conditions. Rapid-quench flow results indicate that the wild-type enzyme has low reactivity toward 4-APA hydroxylation, with a hydroxylation rate constant (kOH) for 4-APA of 0.028 s-1 compared to 17 s-1 for 4-HPA, the native substrate. In contrast, for S146A, the hydroxylation rate constants for both substrates are very similar (2.6 s-1 for 4-HPA versus 2.5 s-1 for 4-APA). These data indicate that Ser146 is a key catalytic residue involved in optimizing C2 reactivity toward a phenolic compound. Removing this hydroxyl group expands C2 activity toward a non-natural aniline substrate. This understanding should be helpful for future rational engineering of other two-component flavin-dependent monooxygenases that have this conserved Ser residue.