Many heme-containing proteins with a histidine in the distal E7 (HisE7) position can form sulfheme in the presence of hydrogen sulfide (H2S) and a reactive oxygen species such as hydrogen peroxide. For reasons unknown, sulfheme derivatives are formed specifically on solvent-excluded heme pyrrole B. Sulfhemes severely decrease the oxygen-binding affinity in hemoglobin (Hb) and myoglobin (Mb). Here, use of hybrid quantum mechanical/molecular mechanical methods has permitted characterization of the entire process of sulfheme formation in the HisE7 mutant of hemoglobin I (HbI) from Lucina pectinata. This process includes a mechanism for H2S to enter the solvent-excluded active site through a hydrophobic channel to ultimately form a hydrogen bond with H2O2 bound to Fe(III). Proton transfer from H2O2 to His64 to form compound (Cpd) 0, followed by hydrogen transfer from H2S to the Fe(III)-H2O2 complex, results in homolytic cleavage of the O-O and S-H bonds to form a reactive thiyl radical (HS(•)), ferryl heme Cpd II, and a water molecule. Subsequently, the addition of HS(•) to Cpd II, followed by three proton transfer reactions, results in the formation of a three-membered ring ferric sulfheme that avoids migration of the radical to the protein matrix, in contrast to that in other peroxidative reactions. The transformation of this three-membered episulfide ring structure to the five-membered thiochlorin ring structure occurs through a significant potential energy barrier, although both structures are nearly isoenergetic. Both three- and five-membered ring structures reveal longer NB-Fe(III) bonds compared with other pyrrole nitrogen-Fe(III) bonds, which would lead to decreased oxygen binding. Overall, these results are in agreement with a wide range of experimental data and provide fertile ground for further investigations of sulfheme formation in other heme proteins and additional effects of H2S on cell signaling and reactivity.