2-Hydroxybiphenyl 3-monooxygenase (HbpA) from Pseudomonas azelaica is an NADH-dependent flavoprotein, that catalyzes the first step in the degradation pathway of 2-hydroxybiphenyl. This monooxygenase can serve as a biocatalyst for diphenol synthesis (e.g. hydroxytyrosol, a potent antioxidant), chiral sulfoxides (e.g. armodafinil, a wake-promoting drug), colorants (e.g. indole), and more. We have determined the structure of HbpA with bound 2-hydroxybiphenyl, as well as several variants, at a resolution of 2.3-2.5 Å to investigate structure-function correlations. An observed hydrogen bond between 2-hydroxybiphenyl and His48 in the active site confirmed the previously suggested role of this residue in substrate deprotonation. The entrance to the active site was confirmed by generating variant G255F which exhibited only 7% of the wild-type’s specific activity, suggesting inhibition of substrate entrance into the active site by the large aromatic residue. In addition, Trp225 and Arg242, which are located in the active site, were found to be involved in the catalytic reaction. Variant W225A led to 14-fold decrease in specific activity and 7-fold decrease in hydroxylation efficiency, while W225Y showed elevated specific activity and similar hydroxylation efficiency. Since the replacement of Arg242 with Ala, Gln or Glu resulted in activity loss, it seems that the demand for Arg in position 242 is due to the unique architecture of the active site. Therefore, residue Arg242 is suggested to facilitate FAD movement and reduction as was previously reported in studies on the homologous protein para-hydroxybenzoate hydroxylase. In addition, it is suggested that Trp225 facilitates proper substrate entrance into the binding pocket. The new insights on HbpA structure and function will be utilized for tailoring biocatalysts with improved activity and selectivity towards various antioxidants and chiral sulfoxides.