Catalase-peroxidases (KatGs), the only catalase-active members of their superfamily, all possess a 35-residue interhelical loop called large loop 2 (LL2). It is essential for catalase activity, but little is known about its contribution to KatG function. LL2 shows weak sequence conservation; however, its length is nearly identical across KatGs, and its apex invariably makes contact with the KatG-unique C-terminal domain. We used site-directed and deletion mutagenesis to interrogate the role of LL2 and its interaction with the C-terminal domain in KatG structure and catalysis. Single and double substitutions of the LL2 apex had little impact on the active site heme [by magnetic circular dichroism or electron paramagnetic resonance (EPR)] and activity (catalase or peroxidase). Conversely, deletion of a single amino acid from the LL2 apex reduced catalase activity by 80%. Deletion of two or more apex amino acids or all of LL2 diminished catalase activity by 300-fold. Peroxide-dependent but not electron donor-dependent kcat/KM values for deletion variant peroxidase activity were reduced 20-200-fold, and kon for cyanide binding diminished by 3 orders of magnitude. EPR spectra for deletion variants were all consistent with an increase in the level of pentacoordinate high-spin heme at the expense of hexacoordinate high-spin states. Together, these data suggest a shift in the distribution of active site waters, altering the reactivity of the ferric state, toward, among other things, compound I formation. These results identify the importance of LL2 length conservation for maintaining an intersubunit interaction that is essential for an active site water distribution that facilitates KatG catalytic activity.