We report the observation of a novel intermediate in the reaction of a reduced toluene/o-xylene monooxygenase hydroxylase (ToMOH(red)) T201S variant, in the presence of a regulatory protein (ToMOD), with dioxygen. This species is the first oxygenated intermediate with an optical band in any toluene monooxygenase. The UV-vis and Mossbauer spectroscopic properties of the intermediate allow us to assign it as a peroxodiiron(III) species, T201S(peroxo), similar to H-peroxo in methane monooxygenase. Although T201S generates T201S(peroxo) in addition to optically transparent ToMOH(peroxo), previously observed in wild-type ToMOH, this conservative variant is catalytically active in steady-state catalysis and single-turnover experiments and displays the same regiospecificity for toluene and slightly different regiospecificity for o-xylene oxidation.