The biosynthesis of the majority of biologically active peptides ends with an obligatory alpha-amidation step that is catalyzed only by peptidylglycine alpha-hydroxylating monooxygenase (PHM). The utility of two mechanisms proposed for this copper- and ascorbate-dependent monooxygenase was examined using site-directed mutagenesis and intrinsic tryptophan fluorescence. Retention of full activity by PHMccGln(170)Ala and -Asn eliminates a critical role for Gln(170) in a substrate-mediated electron transfer pathway. The 20-fold reduction in V-max observed for PHMccGln(170)Glu and -Leu is consistent with a key role for conformational changes in this region. Mutation of Tyr(79), situated near Cu-A, to Trp reduced V-max 200-fold. Measurement of changes in intrinsic fluorescence allowed determination of a K-d for copper (0.06 muM) and for a peptidylglycine substrate, Phe-Gly-Phe-Gly (0.8 muM). Although the peptidylglycine substrate bound more tightly at pH 7.0 than at pH 5.5, V-max decreased 25-fold at neutral pH. Total quenching of the signal from Trp(79) in apoPHMccTyr(79)Trp along with its greatly reduced V-max defines a critical role for Cu-A in the rate-limiting step of the reaction. Taking into account our data and the results of kinetic, spectroscopic, and crystallographic studies, we propose a mechanism in which substrate-mediated activation of molecular oxygen binding at Cu-A completes a pathway for electron transfer from Cu-B.