The P450-catalyzed biotransformation of the analgesic drug paracetamol (PAR) is a long-debated topic, involving different mechanistic hypotheses as well as experimental evidence for the metabolites N-acetyl-p-benzoquinone imine (NAPQI), p-benzoquinone, acetamide, and 3-hydroxy-PAR. During the catalytic cycle of P450, a high-valent iron(IV)-oxo species known as Compound I (Cpd I) is formed as the ultimate oxidant, featuring two energetically close-lying ground states in the doublet (low-spin) and quartet (high-spin) spin states, respectively. In order to clarify the catalytic mechanism, a computational chemistry analysis has been undertaken for both the high- and low-spin routes, employing density functional theory (DFT) including PCM (polarized continuum-solvation model) that yields an approximate simulation of the bulk polarization exerted through the protein. The results demonstrate that hydrogen abstraction transfer (HAT) by the P450 oxidant Cpd I (FeO) is kinetically strongly preferred over the alternative pathways of an oxygen addition reaction (OAR) or two consecutive single-electron transfers (SET). Moreover, only the respective high-spin route yields N-acetyl-p-semiquinone imine (NAPSQI) as an intermediate that is converted to the electrophile N-acetyl-p-benzoquinone imine (NAPQI). By contrast, 3-hydroxy-PAR, acetamide, and p-benzoquinone as electrophilic and redox-active agent are formed predominantly in the low-spin state through reactions that do not involve NAPSQI. Thus, all experimentally observed PAR metabolites are in accord with an initial HAT from the phenolic oxygen, and NAPSQI should indeed be the precursor of NAPQI, both of which are generated only via the high-spin pathway.