The catalytic activity of high-valent iron-oxo active species of heme enzymes is known to be dependent on the nature of the axial ligand trans to the iron-oxo group. In a similar fashion, experimental studies on iron-oxo porphyrin biomimetic systems have shown a significant axial ligand effect on ethylbenzene hydroxylation, with an axial acetonitrile ligand leading to phenyl hydroxylation products and an axial chloride anion giving predominantly benzyl hydroxylation products. To elucidate the fundamental factors that distinguish this regioselectivity reversal in iron-oxo porphyrin catalysis, we have performed a series of density functional theory calculations on the hydroxylation of ethylbenzene by [Fe(IV)=O(Por(+.))L] (Por = porphyrin; L = NCCH(3) or Cl(-)), which affords 1-phenylethanol and p-ethylphenol products. The calculations confirm the experimentally determined product distributions. Furthermore, a detailed analysis of the electronic differences between the two oxidants shows that their reversed regioselectivity is a result of differences in orbital interactions between the axial ligand and iron-oxo porphyrin system. In particular, three high-lying orbitals (pi*(xz), pi*(yz) and a(2u)), which are singly occupied in the reactant complex, are stabilised with an anionic ligand such as Cl(-), which leads to enhanced HOMO-LUMO energy gaps. As a consequence, reactions leading to cationic intermediates through the two-electron reduction of the metal centre are disfavoured. The aliphatic hydroxylation mechanism, in contrast, is a radical process in which only one electron is transferred in the rate-determining transition state, which means that the effect of the axial ligand on this mechanism is much smaller.