Abstract Fungal unspecific peroxygenases (UPOs) are remarkable biocatalysts for the selective oxygenation of non‐activated C─H bonds. Here, we describe a crystallographic and substrate selectivity study of an UPO ortholog from Candolleomyces (Psathyrella) aberdarensis ( Pab UPO‐II). The recombinant enzyme produced in yeast was crystallized and complexed with a representative panel of substrates, including alkanes, fatty acids, and norisoprenoids; the crystals diffracted at a resolution up to 2 Å. Pab UPO‐II combines structural features of canonical long and short UPOs, presenting a hybrid heme channel and a flexible catalytic Glu212 that adopts two alternate conformations, proximal and distal to the substrates. The positioning of substrates at the heme channel in soaking experiments was complemented with a characterization of the enzymatic reactions. With alkanes and fatty acids, Pab UPO‐II carried out oxygenations at ω‐2 and ω‐1, but when forcing the reaction with dicarboxylic acids, α‐ and β‐hydroxylations were detected. Reactions with the α‐ionone and α‐damascone norisoprenoids produced major oxygenations at the cyclohexene and at the vinylic aliphatic chain, respectively. Taken together, Pab UPO‐II shares structural and functional similarities with both long and short UPOs, opening avenues for future engineering endeavors.