The mechanism of the hydroxylation reaction between L-Kyn and model flavin adenine dinucleotide (FAD)-hydroperoxide was investigated via density functional theory (DFT) calculations in the absence and in the presence of the kynurenine 3-monooxygenase (KMO) enzyme by considering possible pathways that can lead to the product 3-hydroxykynurenine (3-HK). Crystal structure (pdb code: 5NAK)-based calculations involved a quantum cluster model in which the active site of the enzyme with the substrate L-Kyn was represented with 348 atoms. According to the deduced mechanism, KMO-catalyzed hydroxylation reaction takes place with four transformations. In the initial transition state, FAD delivers its peroxy hydroxyl to the L-Kyn ring, creating an sp(3)- hybridized carbon center. Then, the hydrogen on the hydroxyl moiety is immediately transferred back to the proximal oxygen that remained on FAD. These consequent transformations are in line with the somersault rearrangement previously described for similar enzymatic systems. The second step corresponds to a hydride shift from the sp(3)-hybridized carbon of the substrate ring to its adjacent carbon, producing the keto form of 3-HK. Then, keto-3-HK is transformed into its enol form (3-HK) with a water-assisted tautomerization. Lastly, FAD is oxidized with a water-assisted dehydration, which also involves 3-HK as a catalyst. In the proposed pathway, Asn54, Pro318, and a crystal water molecule were seen to play significant roles in the proton relays. The energies obtained via the cluster approach were calculated at the B3LYP/6-311+G(2d,2p)//B3LYP/6-31G(d,p) level with solvation (polarizable continuum model) and dispersion (DFT-D3(BJ)) corrections.