CYP121 is a P450 enzyme from that catalyzes a C-C coupling reaction between the two aromatic rings on its native substrate cyclo(l-Tyr-l-Tyr) (cYY) to form mycocyclosin, a necessary product for cell survival. Unlike the typical P450 enzymes for hydroxylation, CYP121 is believed to behave like a peroxidase and conduct radical-mediated C-C bond formation. Here, we probe whether the phenolic hydrogen of the substrate is the site of the postulated hydrogen atom abstraction for radical formation. We synthesized a singly O-methylated substrate analogue, cYF-4-OMe, and characterized its interaction with CYP121 by ultraviolet-visible and electron paramagnetic resonance spectroscopies and X-ray crystallography. We found that cYF-4-OMe can function as a substrate of CYP121 using the established assay via the peroxide shunt. Analysis of the enzymatic reaction revealed an -demethylation of cYF-4-OMe instead of cyclization, yielding cYY and formaldehyde. A hydroxylated substrate, cYF-4-OMeOH, is expected to be the intermediate product, which was trapped and structurally characterized by X-ray crystallography. We further determined that the deformylation reaction of cYF-4-OMeOH proceeds via an alkyl-oxygen rather than aryl-oxygen bond cleavage by the O-labeling studies. Finally, the pH dependence catalytic study on the native substrate and the methoxy analogue further supports the mechanistic understanding that the hydrogen atom abstraction is the critical first oxidation step exerted by a heme-based oxidant during the cyclization reaction of cYY. The switch in catalytic activity reveals the power of CYP121 as a P450 enzyme and provides insight into the peroxidase-like catalytic mechanism.