Directed evolution was applied to dye-decolourizing peroxidase Dyp1B from Pseudomonas fluorescens Pf-5, in order to enhance the activity for oxidation of phenolic and lignin substrates. Saturation mutagenesis was used to generate focused libraries at 7 active site residues in the vicinity of the heme cofactor, and the libraries were screened for activity towards 2,6-dichlorophenol. Mutants N193 L and H169 L were found to show 7-8 fold enhanced k(cat)/K-M towards DCP, and replacements at Val205 and Ala209 also showed enhanced activity towards alkali Kraft lignin. Residues near the predicted Mn(II) binding site were also investigated by site-directed mutagenesis, and mutants 5223 N and H127R showed 4-7-fold increased k(cat)/K-M for Mn(II) oxidation. Mutant F128R also showed enhanced thermostability, compared to wild-type Dyp1B. Testing of mutants for low molecular weight product release from Protobind alkali lignin revealed that mutant H169 L showed enhanced product release, compared with WT enzyme, and the formation of three low molecular weight metabolites by this mutant was detected by reverse phase HPLC analysis.