Lignin peroxidase catalyzed the rearrangement of 2-(2́-methoxy-4́-propylphenoxy)-1,3-dihydroxypropane I to 3-(2́-methoxy-4́-propylphenoxy)-1,2-dihydroxypropane VI with a maximum product yield of 64%. The reaction was strongly inhibited by oxygen. The enzyme also catalyzed the rearrangement of 2-(2́-methoxy-4́-propylphenoxy) -1-hydroxypropane IV to form 1-(2́-methoxy-4́-propylphenoxy)-2-hydroxypropane VIII. When IV was labeled with 18O in the 1-hydroxyl group, all of the 18O was retained in the ether oxygen of the product VIII. A mechanism explaining these results involves: (i) one electron oxidation of the substrate to form an aryl cation radical; (ii) nucleophilic attack by the hydroxyl oxygen on the cation radical with release of a proton, resulting in a dioxolane radical intermediate; (iii) cleavage of the latter and subsequent hydrogen abstraction to form the rearranged product.