Phytosphingosine (PHS) is the major long-chain base component of sphingolipids in Saccharomyces cerevisiae. The PHS metabolic pathway includes a fatty acid (FA) α-oxidation reaction. Recently, we identified the novel protein Mpo1, which is involved in PHS metabolism. However, the details of the FA α-oxidation reaction and the role of Mpo1 in PHS metabolism remained unclear. In the present study, we revealed that Mpo1 is involved in the α-oxidation of 2-hydroxy (2-OH) palmitic acid (C16:0-COOH) in the PHS metabolic pathway. Our in vitro assay revealed that not only the Mpo1-containing membrane fraction but also the soluble fraction was required for the α-oxidation of 2-OH C16:0-COOH. The addition of Fe2+ eliminated the need for the soluble fraction. Purified Mpo1 converted 2-OH C16:0-COOH to C15:0-COOH in the presence of Fe2+, indicating that Mpo1 is the enzyme body responsible for catalyzing the FA α-oxidation reaction. This reaction was also found to require an oxygen molecule. Our findings indicate that Mpo1 catalyzes the FA α-oxidation reaction as 2-OH fatty acid dioxygenase, mediated by iron(IV) peroxide. Although numerous Mpo1 homologs exist in bacteria, fungi, protozoa, and plants, their functions had not yet been clarified. However, our findings suggest that these family members function as dioxygenases.