Oxidized cytochrome bo reacts rapidly with micromolar concentrations of H2O2 to form a single derivative. The electronic absorption spectrum of this compound differs from that of the oxidized form of the enzyme reported by this laboratory [Watmough, Cheesman, Gennis, Greenwood and Thomson (1993) FEBS Lett. 319, 151-154]. It is characterized by a Soret maximum at 411 nm, increased absorbance at 555 nm, and reduced intensity at 624 nm. The apparent dissociation constant for this process is of the order of 4 x 10(-6) M, and the bimolecular rate constant for the formation of the new compound is (1.25-1.7) x 10(3) M-1.s-1. Electronic absorption difference spectroscopy shows this product to be identical with the compound formed from the reaction of the mixed-valence form of the enzyme with dioxygen. Investigation of this compound by room-temperature magnetic c.d. spectroscopy shows haem o to be neither high-spin nor low-spin ferric, but to have a spectrum characteristic of an oxyferryl species. There is no evidence for oxidation of the porphyrin ring. Therefore the binuclear centre of this species must consist of an oxyferryl haem (S = 1) coupled to a Cu(II) ion (S = 1/2) to form a new paramagnetic centre. The reaction was also followed by X-band e.p.r. spectroscopy, and this showed the disappearance in parallel with the formation of the oxyferryl species, of the broad g = 3.7, signal which arises from the weakly coupled binuclear centre in the oxidized enzyme. Since no new e.p.r.-detectable paramagnetic species were observed, the Cu(II) ion is presumed to be coupled to another paramagnet, possibly an organic radical. There is no evidence in the electronic absorption spectrum to indicate further reaction of cytochrome bo with H2O2 to form a second species. We argue that the circumstances of formation of this oxyferryl species are the same as those for the P form of cytochrome c oxidase, a species often regarded as containing a bound peroxide ion. The implications of these observations for the reaction mechanism of haem-copper terminal oxidases are discussed.