The negative impacts on the ecosystem of antibiotic residues in the environment have become a global concern. However, little is known about the transformation mechanism of antibiotics by manganese peroxidase (MnP) from microorganisms. This work investigated the transformation characteristics, the antibacterial activity of byproducts, and the degradation mechanism of tetracycline (TC) by purified MnP from Phanerochaete chrysosporium. The results show that nitrogen-limited and high level of Mn2+ medium could obtain favorable MnP activity and inhibit the expression of lignin peroxidase by Phanerochaete chrysosporium. The purified MnP could transform 80% tetracycline in 3 h, and the threshold of reaction activator (H2O2) was about 0.045 mmol L−1. After the 3rd cyclic run, the transformation rate was almost identical at the low initial concentration of TC (77.05–88.47%), while it decreased when the initial concentration was higher (49.36–60.00%). The antimicrobial potency of the TC transformation products by MnP decreased throughout reaction time. We identified seven possible degradation products and then proposed a potential TC transformation pathway, which included demethylation, oxidation of the dimethyl amino, decarbonylation, hydroxylation, and oxidative dehydrogenation. These findings provide a novel comprehension of the role of MnP on the fate of antibiotics in nature and may develop a potential technology for tetracycline removal.