Nox4 is an oddity among members of the Nox family of NADPH oxidases [seven isoenzymes that generate reactive oxygen species (ROS) from molecular oxygen] in that it is constitutively active. All other Nox enzymes except for Nox4 require upstream activators, either calcium or organizer/activator subunits (p47(phox), NOXO1/p67(phox), and NOXA1). Nox4 may also be unusual as it reportedly releases hydrogen peroxide (H₂O₂) in contrast to Nox1-Nox3 and Nox5, which release superoxide, although this result is controversial in part because of possible membrane compartmentalization of superoxide, which may prevent detection. Our studies were undertaken (1) to identify the Nox4 ROS product using a membrane-free, partially purified preparation of Nox4 and (2) to test the hypothesis that Nox4 activity is acutely regulated not by activator proteins or calcium, but by cellular pO₂, allowing it to function as an O₂ sensor, the output of which is signaling H₂O₂. We find that approximately 90% of the electron flux through isolated Nox4 produces H₂O₂ and 10% forms superoxide. The kinetic mechanism of H₂O₂ formation is consistent with a mechanism involving binding of one oxygen molecule, which is then sequentially reduced by the heme in two one-electron reduction steps first to form a bound superoxide intermediate and then H₂O₂; kinetics are not consistent with a previously proposed internal superoxide dismutation mechanism involving two oxygen binding/reduction steps for each H₂O₂ formed. Critically, Nox4 has an unusually high Km for oxygen (∼18%), similar to the values of known oxygen-sensing enzymes, compared with a Km of 2-3% for Nox2, the phagocyte NADPH oxidase. This allows Nox4 to generate H₂O₂ as a function of oxygen concentration throughout a physiological range of pO2 values and to respond rapidly to changes in pO₂.