The nature of the heme environment in methemalbumin, the Fe(III) protoporphyrin IX (heme)-human serum albumin (HSA) complex, was investigated by optical spectroscopy. Comparison of the optical spectra of methemalbumin, ferro-hemalbumin in the absence and presence of 2-methylimidazole, and their carbon monoxide derivatives with horseradish peroxidase (HRP) and its corresponding derivatives indicates that histidine is not present in the first coordination sphere of heme in methemalbumin and that the protein is devoid of a well-defined heme cavity. The complex exhibits peroxidase activity by catalyzing oxidation of 2,2'-azinobis(3-ethylbenzthiazoline-6-sulfonate) by hydrogen peroxide. Its activity ( K(M)=433 microM, molar catalytic activity=0.33 s(-1)), however, is considerably lower compared to HRP, indicating differences in the heme environments. Fluorescence intensity decays of Trp214 in HSA and methemalbumin, best fitted to a three-exponential model, gave the lifetimes 7.03 ns (30%), 3.17 ns (38%), and 0.68 ns (32%) for HSA and 8.04 ns (1.7%), 2.42 ns (19.7%), and 0.64 ns (78.6%) for methemalbumin. These lifetime values were further confirmed by a model-independent maximum entropy method. Similarity in the lifetimes and variations in the amplitudes suggest that while conformational heterogeneity of HSA is unperturbed on heme binding, redistribution of the populations of the three conformations occurs and the sub-state associated with the shortest lifetime dominates the total population by approximately 80%. Decay associated spectra (DAS) indicate that the observed lifetime variation with wavelength is predominantly due to ground state heterogeneity, though solvent dipolar relaxation also contributes. Time-resolved fluorescence anisotropy measurements of the Trp214 residue yielded information on motion within the protein together with the whole protein molecule. The binding of heme did not affect the rotational correlation time of the albumin molecule (approximately 20 ns). However, the motion of tryptophan within the protein matrix increased by a factor of approximately 3 (0.46 ns to 0.15 ns). This indicates that while the overall hydrodynamic volume of the albumin molecule remained the same, tryptophan underwent a more rapid internal rotation because of the efficient energy transfer to the bound heme. Optical studies, analysis of lifetime measurements, DAS, and anisotropy measurements together suggest that heme binds to a surface residue. The rapid internal motion of Trp214 during its excited state lifetime for the approximately 80% populated conformer of methemalbumin allows the orientation factor, kappa(2), to approach the average value of 2/3. From the time-resolved fluorescence measurements and the energy transfer calculations on methemalbumin, a Trp214-heme distance of 22 A was deduced.