Phenylacetone monooxygenase (PAMO) from Thermobifida fusca is a FAD-containing Baeyer-Villiger monooxygenase (BVMO). To elucidate the mechanism of conversion of phenylacetone by PAMO, we have performed a detailed steady-state and pre-steady-state kinetic analysis. In the catalytic cycle ( k cat = 3.1 s (-1)), rapid binding of NADPH ( K d = 0.7 microM) is followed by a transfer of the 4( R)-hydride from NADPH to the FAD cofactor ( k red = 12 s (-1)). The reduced PAMO is rapidly oxygenated by molecular oxygen ( k ox = 870 mM (-1) s (-1)), yielding a C4a-peroxyflavin. The peroxyflavin enzyme intermediate reacts with phenylacetone to form benzylacetate ( k 1 = 73 s (-1)). This latter kinetic event leads to an enzyme intermediate which we could not unequivocally assign and may represent a Criegee intermediate or a C4a-hydroxyflavin form. The relatively slow decay (4.1 s (-1)) of this intermediate yields fully reoxidized PAMO and limits the turnover rate. NADP (+) release is relatively fast and represents the final step of the catalytic cycle. This study shows that kinetic behavior of PAMO is significantly different when compared with that of sequence-related monooxygenases, e.g., cyclohexanone monooxygenase and liver microsomal flavin-containing monooxygenase. Inspection of the crystal structure of PAMO has revealed that residue R337, which is conserved in other BVMOs, is positioned close to the flavin cofactor. The analyzed R337A and R337K mutant enzymes were still able to form and stabilize the C4a-peroxyflavin intermediate. The mutants were unable to convert either phenylacetone or benzyl methyl sulfide. This demonstrates that R337 is crucially involved in assisting PAMO-mediated Baeyer-Villiger and sulfoxidation reactions.