Ethylene is an important signaling molecule in plants that triggers the growth of leaves, flowers and fruits. One of the enzymes involved in the biosynthesis of ethylene is the ethylene-forming enzyme (EFE), which is an usual nonheme iron enzyme that biodegrades α-ketoglutarate to three CO2 molecules and ethylene. As the detailed mechanism of EFE and its biosynthesis of ethylene remains controversial and particularly the function of the co-substrate L-arginine, we decided to pursue a density functional theory study on possible pathways of the enzyme leading to its ethylene biosyn-thesis and test many possible pathways and mechanisms. A large active site cluster model of 322 atoms was created that contains all features of the first- and second-coordination sphere of the active site and substrate (α-ketoglutarate) binding pockets. The calculations identify a persuccinate intermediate that triggers a bifurcation pathway in the enzyme and either reacts with a molecule of CO2 to form carbonate or forms a high-valent iron(IV)-oxo species through heterolytic dioxygen bond cleavage. Our studies show that both bifurcation pathways converge to the same intermediate again and can lead to ethylene products, although the two pathways have different kinetics. Interestingly, our studies also show that the iron(IV)-oxo itself can form carbonate and ethylene but through much higher barriers. As a matter of fact, these barriers are higher in energy than typical aliphatic hydroxylation barriers and may not be competitive with arginine hydroxylation. Inclusion of L-arginine co-substrate into the model leads to minor changes in the structure and fold and its charge and dipole moment does not seem to affect the first stage of the catalytic cycle. Moreover, key activation barriers appear little affected by the inclusion of L-arginine into the model. We, therefore, believe that L-arginine’s role is to lock α-ketoglutarate and its products into a tight binding pocket to enable its degradation and to prevent early release of CO2. Our studies show that due to distinct differences in α-ketoglutarate positioning between different arginine activating nonheme iron dioxygenases in the co-substrate binding pocket and its tighter binding in EFE, we predict that the release of CO2 is prevented in the first stage of the oxygen activation mechanism. This enables attack of CO2 on a persuccinate complex to form carbonate products leading to ethylene formation. The work gives suggestions on the engineering of EFE into a hydroxylase or improve the ethylene biosynthesis.