Anionic tobacco peroxidase (TOP) (mol wt 36 kDa, pI 3.5) was purified from transgenic tobacco plants with the yield of 60 mg/1 kg leaves. The enzyme exhibits unusual properties, i.e., Compound I is less reactive than Compound II. The enzyme was investigated in oxidation of indole-3-acetic acid (IAA) oxidation by oxygen in the air. The aerobic steady-state spectral studies reveal that Compound II is the key intermediate of the reaction mechanism. This was confirmed in the anaerobic stopped-flow experiments. No reaction between the enzyme and IAA is observed under anaerobic conditions. The data obtained are interpreted in terms of a ternary complex formation (ferric enzyme-IAA-oxygen) at the initiation step resulting in production of IAA radicals. The latter interacts with the ferric enzyme and oxygen producing Compound II. The oxidative cycle involves the ferric enzyme and Compound II, and is independent from the peroxidative one.