Ammonia oxidizing bacteria (AOB) are major contributors to the emission of nitrous oxide (N2O). It has been proposed that N2O is produced by reduction of NO. Here, we report that the enzyme cytochrome (cyt) P460 from the AOB Nitrosomonas europaea converts hydroxylamine (NH2OH) quantitatively to N2O under anaerobic conditions. Previous literature reported that this enzyme oxidizes NH2OH to nitrite (NO2-) under aerobic conditions. Although we observe NO2- formation under aerobic conditions, its concentration is not stoichiometric with the NH2OH concentration. By contrast, under anaerobic conditions, the enzyme uses 4 oxidizing equivalents (eq) to convert 2 eq of NH2OH to N2O. Enzyme kinetics coupled to UV/visible absorption and electron paramagnetic resonance (EPR) spectroscopies support a mechanism in which an Fe-III-NH2OH adduct of cyt P460 is oxidized to an {FeNO}(6) unit. This species subsequently undergoes nucleophilic attack by a second equivalent of NH2OH, forming the N-N bond of N2O during a bimolecular, rate-determining step. We propose that NO2- results when nitric oxide (NO) dissociates from the {FeNO}(6) intermediate and reacts with dioxygen. Thus, NO2- is not a direct product of cyt P460 activity. We hypothesize that the cyt P460 oxidation of NH2OH contributes to NO and N2O emissions from nitrifying microorganisms.