Mycobacterium tuberculosis (Mtb) produces a variety of methyl-branched lipids that serve important functions, including modulating the immune response during pathogenesis and contributing to a robust cell wall that is impermeable to many chemical agents. Here, we report characterization of Mtb CYP124 (Rv2266) that includes demonstration of preferential oxidation of methyl-branched lipids. Spectrophotometric titrations and analysis of reaction products indicate that CYP124 tightly binds and hydroxylates these substrates at the chemically disfavored omega-position. We also report X-ray crystal structures of the ligand-free and phytanic acid-bound protein at a resolution of 1.5 A and 2.1 A, respectively, which provide structural insights into a cytochrome P450 with predominant omega-hydroxylase activity. The structures of ligand-free and substrate-bound CYP124 reveal several differences induced by substrate binding, including reorganization of the I helix and closure of the active site by elements of the F, G, and D helices that bind the substrate and exclude solvent from the hydrophobic active site cavity. The observed regiospecific catalytic activity suggests roles of CYP124 in the physiological oxidation of relevant Mtb methyl-branched lipids. The enzymatic specificity and structures reported here provide a scaffold for the design and testing of specific inhibitors of CYP124.