PhnZ utilizes a mixed valence diiron(II/III) cofactor and O2 to oxidatively cleave the carbon-phosphorus bond of (R)-2-amino-1-hydroxyethylphosphonic acid to form glycine and orthophosphate. The active site residues Y24 and E27 are proposed to mediate induced-fit recognition of the substrate and access of O2 to one of the active site Fe ions. H62 is proposed to deprotonate the C1-hydroxyl of the substrate during catalysis. Kinetic isotope effects (KIEs), pH-rate dependence, and site-directed mutagenesis were used to probe the rate-determining transition state and the roles of these three active site residues. Primary deuterium KIE values of 5.5 ± 0.3 for D(V) and 2.2 ± 0.4 for D(V/K) were measured with (R)-2-amino[1-2H1]-1-hydroxyethylphosphonic acid, indicating that cleavage of the C1-H bond of the substrate is rate-limiting. This step is also rate-limiting for PhnZ Y24F, as shown by a significant deuterium KIE value of 2.3 ± 0.1 for D(V). In contrast, a different reaction step appears to be rate-limiting for the PhnZ E27A and H62A variants, which exhibited D(V) values near unity. A solvent KIE of 2.2 ± 0.3 for D2O(V) is observed for PhnZ. Significant solvent KIE values are also observed for the PhnZ Y24F and E27A variants. In contrast, the PhnZ H62A variant does not show a significant solvent KIE, suggesting that H62 is mediating proton transfer in the transition state. A proton inventory study with PhnZ indicates that 1.5 ± 0.6 protons are in flight in the rate-determining step. Overall, the rate-determining transition state for oxidative C-P bond cleavage by PhnZ is proposed to involve C-H bond cleavage that is coupled to deprotonation of the substrate C1-hydroxyl by H62.