Laccase is a multicopper oxidase which contains four coppers, one type 1, one type 2, and a coupled binuclear type 3 pair, the type 2 and type 3 copper centers together forming a trinuclear copper cluster. The type 1 mercury derivative of laccase (T1Hg Lc) has the type 1 center substituted with a redox inactive Hg2+ ion and an intact trinuclear copper cluster. Reaction of reduced T1Hg Lc with dioxygen produces an oxygen intermediate which has now been studied in detail. Isotope ratio mass spectrometry (IRMS) has shown that both oxygen atoms of O-2 are bound in the intermediate. EPR and SQUID magnetic susceptibility studies have shown that the intermediate is diamagnetic. The results combined with X-ray absorption edge data indicate that the intermediate contains a bound peroxide and that the two electrons have derived from the type 3 center which is antiferromagnetically coupled. EXAFS data show that there is no short Cu-oxo bond in the intermediate and that there is a new bridging interaction in the intermediate, with two coppers being separated by 3.4 Angstrom, that is not present in the resting enzyme. Circular dichroism (CD) and magnetic circular dichroism (MCD) studies in the ligand field region confirm that the two type 3 coppers are oxidized and antiferromagnetically coupled and that the type 2 copper is reduced. In addition, the charge transfer (CT) absorption spectrum of the intermediate supports a mu-1, 1 hydroperoxide description based on a comparison to Cu(II)-peroxo model spectra. The decay of the T1Hg Lc oxygen intermediate is pH dependent, slow, and proceeds through an additional intermediate with an MCD spectrum in the CT region analogous to that of the oxygen intermediate in the native enzyme which is at least one electron further reduced. These studies lead to a spectroscopically effective model for peroxide bound to the trinuclear copper cluster site in the intermediate, and provide significant insight into the molecular mechanism of the catalytic reduction of dioxygen to water by the multicopper oxidases.