A two-state rebound mechanism of alkane hydroxylation by a model active species of the enzyme cytochrome P450 is studied using density functional theoretic calculations. Theory corroborates Groves's rebound mechanism (Groves, J. T. J. Chem. Educ. 1985, 62, 928), with a key difference,namely that in the two-state rebound the reactivity and product distribution result from the interplay of two reactive states of the active ferryl-oxene (Por(+.)FeO) species of the enzyme: one state is low-spin (doublet) and the other high-spin (quartet). Transition-state structures, intermediates, and product complexes are identified for the two states. The bond activation in either one of the two states involves a hydrogen abstraction-like transition structure. However, while in the high-spin state there forms a radical that has a significant barrier for rebound, in the low-spin state the rebound is virtually barrierless. Even though one cannot ignore incursion of a small amount of radicals in the low-spin state, it is clear that the radical has a significant lifetime mainly on the high-spin surface. The results are used to gain insight into puzzling experimental data which emerge from studies of ultrafast radical clocks (e.g., Toy, P. H.; Newcomb, M.; Hollenberg, P. F., J. Am. Chem. Sec. 1998, 120, 7719), vis a vis the nature the transition state, deduced from kinetic isotope effect measurements (Manchester, J. I.; Dinnocenzo, J. P.; Higgins, L. A.; Jones, J. P. J. Am. Chem. Sec. 1997, 119, 5069) and stereochemical scrambling patterns (Groves, J. T.; McClusky, G. A.; White, R. E.; Goon, M. J. Biochem. Biophys. Res. Commun. 1978, 81, 154). Understanding the electronic structure of the various species leads to a predictive structure-reactivity picture, based on the two-state reactivity scenario (Shaik, S.; Filatov, M.; Schroder, D.; Schwarz, H. Chem. fur. J. 1998, 4, 193). The model makes it possible to predict the dependence of the relative rates of the two states, and of the corresponding steps as a function of the nature of the alkane, the resulting alkyl radical, and the binding capability of the thiolate proximal ligand of the active species.