SznF, a member of the emerging family of heme‐oxygenase‐like (HO‐like) di‐iron oxidases and oxygenases, employs two distinct domains to catalyze the conversion of Nω‐methyl‐L‐arginine (L‐NMA) into N‐nitroso‐containing product, which can subsequently be transformed into streptozotocin. Using unrestricted density functional theory (UDFT) with the hybrid functional B3LYP, we have mechanistically investigated the two sequential hydroxylations of L‐NMA catalyzed by SznF's binuclear iron central domain. Mechanism B primarily involves the O‐O bond dissociation, forming Fe(IV)=O, induced by the H+/e− introduction to the FeA side of μ‐1,2‐peroxo‐Fe2(III/III), the substrate hydrogen abstraction by Fe(IV)=O, and the hydroxyl rebound to the substrate N radical. The stochastic addition of H+/e− to the FeB side (mechanism C) can transition to mechanism B, thereby preventing enzyme deactivation. Two other competing mechanisms, involving the direct O‐O bond dissociation (mechanism A) and the addition of H2O as a co‐substrate (mechanism D), have been ruled out.