Amine oxidation, a process widely utilized by flavoprotein oxidases, is the rate-determining step in the three-step demethylation of N-methyltryptophan (NMT) catalyzed by N-methyltryptophan oxidase (MTOX), which employs a covalently bound flavin adenine dinucleotide (FAD) as cofactor. For the required transfer of a hydride ion equivalent, three pathways (direct/concerted, radical, and adduct-forming/polar nucleophilic) have been proposed, without a consensus on which one is commonly used by amine oxidases. We combine theoretical pKa analysis, classical molecular dynamics (MD) simulations, and pure quantum mechanics (QM) and hybrid QM/molecular mechanics (QM/MM) calculations to provide molecular-level insights into the catalytic mechanism of NMT oxidation and to analyze the role of MTOX active-site residues and covalent FAD incorporation for NMT binding and oxidation. The QM(B3LYP-D2/6-31G(d))/CHARMM results clearly favor a direct concerted hydride transfer (HT) mechanism involving anionic NMT as the reactive species. On the basis of classical canonical MD simulations and QM/MM calculations of wild-type MTOX and two mutants (K341Q and H263N), we propose that the K341 residue acts as an active-site base and electrostatically, whereas H263 and Tyr249 only support substrate alignment. Covalent FAD binding leads to a more bent isoalloxazine moiety, which facilitates the binding of anionic NMT but increases the catalytic activity of FAD only slightly.