Recent reports show that there is a large increase in heme in the temporal brain of Alzheimer's disease (AD) patients, as heme, biosynthesized in brain cells, binds to amyloid beta (A beta), forming heme A beta complexes. This leads to the development of symptoms that are characteristic pathological features of AD, e.g., abnormal iron homeostasis, decay of iron regulatory proteins, dysfunction in mitochondrial complex IV, oxidative stress, etc. However, the active site resulting from heme binding to A beta is not well characterized. For example, the coordinating residue, relevant second-sphere residues, and spin state of the Fe center are not known. In this study we have used wild-type and mutated A beta peptides and investigated their interaction with naturally occurring heme. Our results show that, out of several possible binding sites, His(13) and His(14) residues can both bind heme under physiological conditions, resulting in an axial high-spin active site with a trans axial water-derived ligand. Peroxidase assays of these heme peptide complexes along with pH perturbations indicate that Arg(5) is a key second-sphere residue that H-bonds to the trans axial ligand and is responsible for the peroxidase activity of the heme-A beta complexes. The His(13) and Arg(5) residues identified in this study are both absent in rodents, which do not show AD, implicating the significance of these residues as well as heme in the pathology of AD.