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. The crystal structure of the enzyme with bound substrate has been recently reported by us. In order to study structure-function implications and the ability of HbpA to produce antioxidants and chiral sulfoxides, several hundreds of variants with mutations in the active site were generated and characterized. It was found that residues N205, R242 and P320 are involved in enabling the movement of the FAD cofactor, which in turn influenced HbpA activity. Residues D222 and M223 seem to be involved in NADH entrance or binding in the active site since most variants that were characterized resulted in a decrease of specific activity and affinity. The exceptions were D222N which significantly increased its affinity towards NADH, and M223Q that increased NADH oxidation by 1.3-fold. Variant W225A led to a 14-fold decrease in specific activity while W225Y showed elevated specific activity, indicating on involvement of W225 in the catalytic reaction. While most variants that were generated for residue M321 lost their activity, variants M321L, M321F and M321V exhibited improvement in hydroxylation efficiency. Interestingly, variant M321A, which was less active than WT by 1.4-fold on the natural substrate, demonstrated altered regiospecificity by oxidizing for the first time 3-hydroxybiphenyl to 3,4-dihydroxybiphenyl. These results suggest that M321 is crucial for proper orientation of the substrate in the active site pocket. The new insights will be utilized for tailoring biocatalysts with improved activity and selectivity towards various antioxidants and chiral sulfoxides.