Peroxiredoxins (Prxs) catalyse the rapid reduction of hydrogen peroxide, organic hydroperoxide and peroxynitrite, using a fully conserved peroxidatic cysteine (CP) located in a conserved sequence Pxxx(T/S)xxCP motif known as CP-loop. In addition, Prxs are involved in cellular signaling pathways and regulate several redox-dependent process related disease. The effective catalysis of Prxs is associated with alterations in the CP-loop between reduced, Fully Folded (FF), and oxidized, Locally Unfolded (LU) conformations, which are linked to dramatic changes in the oligomeric structure. Despite many studies, little is known about the precise structural and dynamic roles of the CP-loop on Prxs functions. Herein, the comprehensive biochemical and biophysical studies on Escherichia coli alkyl hydroperoxide reductase subunit C (EcAhpC) and the CP-loop mutants, EcAhpC-F45A and EcAhpC-F45P reveal that the reduced form of the CP-loop adopts conformational dynamics, which is essential for effective peroxide reduction. Furthermore, the point mutants alter the structure and dynamics of the reduced form of the CP-loop and, thereby, affect substrate binding, catalysis, oligomerization, stability and overoxidiation. In the oxidized form, due to restricted CP-loop dynamics, the EcAhpC-F45P mutant favours a decamer formation, which enhances the effective recycling by physiological reductases compared to wild-type EcAhpC. In addition, the study reveals that residue F45 increases the specificity of Prxs-reductase interactions. Based on these studies, we propose an evolution of the CP-loop with confined sequence conservation within Prxs subfamilies that might optimize the functional adaptation of Prxs into various physiological roles.