The activation of dioxygen by heme oxygenase proceeds via formation of an obligatory ferric hydroperoxide intermediate (FeIII-OOH), as is the case in the activation of dioxygen by monooxygenase enzymes. This review summarizes current understanding of the structural and dynamic properties in heme oxygenase that channel the reactivity of the FeIII-OOH intermediate toward heme hydroxylation rather than oxoferryl formation. In addition, structural and electronic factors dictating the regiospecificity of heme oxygenation are analyzed in the context of recent X-ray and NMR spectroscopic studies. Differences in mechanism between heme hydroxylation, as carried out by heme oxygenase, and the coupled oxidation process, are also addressed.