Horseradish peroxidase (HRP) is one of the most relevant peroxidase enzymes, used extensively in immunochemistry and biocatalysis applications. Unlike the closely related catalase enzymes, it exhibits a low activity to disproportionate hydrogen peroxide (H2O2). The origin of this disparity remains unknown due to the lack of atomistic information on the catalase-like reaction in HRP. Using QM(DFT)/MM metadynamics simulations, we uncover the mechanism for reduction of the HRP Compound I intermediate by H2O2 at atomic detail. The reaction begins with a hydrogen atom transfer, forming a peroxyl radical and a Compound II-like species. Reorientation of the peroxyl radical in the active site, concomitant with the transfer of the second hydrogen atom, is the rate-limiting step, with a computed free energy barrier (18.7 kcal/mol, similar to 6 kcal/mol higher than the one obtained for catalase) in good agreement with experiments. Our simulations reveal the crucial role played by the distal pocket residues in accommodating H2O2, enabling formation of a Compound II-like intermediate, similar to catalases. However, out of the two pathways for Compound II reduction found in catalases, only one is operative in HRP. Moreover, the hydrogen bond network in the distal side of HRP compensates less efficiently than in catalases for the energetic cost required to reorient the peroxyl radical at the rate-determining step. The distal Arg and a water molecule in the "wet" active site of HRP have a substantial impact on the reaction barrier, compared to the "dry" active site in catalase. Therefore, the lower catalase-like efficiency of heme peroxidases compared to catalases can be directly attributed to the different distal pocket architecture, providing hints to engineer peroxidases with a higher rate of H2O2 disproportionation.