The hydroxylation of phenol to hydroquinone and catechol in the presence of dihydroxyfumaric acid and oxygen catalyzed by horseradish peroxidase was studied under conditions where the product yield was high and the side reactions were minimal. The reaction is partially uncoupled with a molar ratio of dihydroxyfumaric acid consumed to hydroxylated products of 12:1. Hydrogen peroxide does not participate in the reaction as evidenced by the lack of effect of catalase and by the direct addition of hydrogen peroxide. Conversely, superoxide and hydroxyl radicals are involved as their scavengers are potent inhibitors. Experiments were all consistent with the involvement of compound III (oxygenated ferrous complex) of peroxidase in the reaction. Compound III is stable in the presence of phenol alone but decomposes rapidly in the presence of both phenol and dihydroxyfumaric acid with the concomitant formation of product. Therefore, phenol and dihydroxyfumaric acid must be present with compound III in order for the hydroxylation reaction to occur. A mechanism consistent with the experimental results is proposed.