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Commercial scale production of biofuels from lignocellulosic feed stocks has been hampered by the resistance of plant cell walls to enzymatic conversion, primarily owing to lignin. This study investigated whether DypB, the lignin-degrading peroxidase from Rodococcus jostii, depolymerizes lignin and reduces recalcitrance in transgenic tobacco (Nicotiana benthamiana). The protein was targeted to the cytosol or the ER using ER-targeting and retention signal peptides. For each construct, five independent transgenic lines were characterized phenotypically and genotypically. Our findings reveal that expression of DypB in the cytosol and ER does not affect plant development. ER-targeting increased protein accumulation, and extracts from transgenic leaves showed higher activity on classic peroxidase substrates than the control. Intriguingly, in situ DypB activation and subsequent saccharification released nearly 200% more fermentable sugars from transgenic lines than controls, which were not explained by variation in initial structural and non-structural carbohydrates and lignin content. Pyrolysis-GC-MS analysis showed more reduction in the level of lignin associated pyrolysates in the transgenic lines than the control primarily when the enzyme is activated prior to pyrolysis, consistent with increased lignin degradation and improved saccharification. The findings reveal for the first time that accumulation and in situ activation of a peroxidase improves biomass digestibility.