The iron-dependent oxidase UndA cleaves one C3-H bond and the C1-C2 bond of dodecanoic acid to produce 1-undecene and CO2. A published X-ray crystal structure showed that UndA has a heme-oxygenase-like fold, thus associating it with a structural superfamily that includes known and postulated non-heme diiron proteins, but revealed only a single iron ion in the active site. Mechanisms proposed for initiation of decarboxylation by cleavage of the C3-H bond using a monoiron cofactor to activate O-2 necessarily invoked unusual or potentially unfeasible steps. Here we present spectroscopic, crystallographic, and biochemical evidence that the cofactor of Pseudomonas fluorescens Pf-S UndA is actually a diiron cluster and show that binding of the substrate triggers rapid addition of O-2 to the Fe-2(II/II) cofactor to produce a transient peroxo-Fe-2(III/III) intermediate. The observations of a diiron cofactor and substrate-triggered formation of a peroxo-Fe-2(III/III) intermediate suggest a small set of possible mechanisms for O-2, C3-H and C1-C2 activation by UndA; these routes obviate the problematic steps of the earlier hypotheses that invoked a single iron.