Fungal peroxygenases resemble the peroxide shunt pathway of cytochrome P450 monoxygenases, performing selective oxyfunctionalizations of unactivated C-H bonds in a broad range of organic compounds. In this study, we combined neutral genetic drift and in vivo DNA shuffling to generate highly functional peroxygenase mutant libraries. The panel of neutrally evolved peroxygenases showed different activity profiles for peroxygenative substrates and improved stability with respect to temperature and the presence of organic cosolvents, making the enzymes valuable blueprints for emerging evolution campaigns. This association of DNA recombination and neutral drift is paving the way for future work in peroxygenase engineering and, from a more general perspective, to any other enzyme system heterologously expressed in S. cerevisiae.