The active species, Compound I, of horseradish peroxidase (HRP) has been investigated by quantum mechanical/molecular mechanical (QM/MM) calculations using 10 different QM regions. In accord with experimental data, the lowest doublet and quartet states are found to be virtually degenerate, with two unpaired electrons on the FeO moiety and one localized on the porphyrin in an a(2u)-dominant orbital with a minor, but nonnegligible, a(1u) component. The proximal ligand appears to be imidazole rather than imidazolate. The hydrogen-bonding network around the FeO moiety (i.e., Arg(38) and His(42)) has significant influence on the axial bonds and the spin density distribution in the FeO moiety. Including this network in the QM region was found to be essential for reproducing the experimental Mossbauer parameters. The protein environment shapes most of the subtle features of Compound I of HRP.