Soluble pyridine nucleotide transhydrogenases (STHs) are flavoenzymes involved in the redox homeostasis of the essential cofactors NAD(H) and NADP(H). They catalyze the reversible transfer of reducing equivalents between the two nicotinamide cofactors. The soluble transhydrogenase from Escherichia coli (SthA) has found wide use in both in vivo and in vitro applications to steer reducing equivalents towards NADPH-requiring reactions. However, mechanistic insight into SthA function is still lacking. In this work, we present a biochemical characterization of SthA, focusing for the first time on the reactivity of the flavoenzyme with molecular oxygen. We report on oxidase activity of SthA that takes place both during transhydrogenation and in the absence of an oxidized nicotinamide cofactor as an electron acceptor. We find that this reaction produces the reactive oxygen species (ROS) hydrogen peroxide and superoxide anion. Furthermore, we explore the evolutionary significance of the well conserved CXXXXT motif that distinguishes STHs from the related family of flavoprotein disulfide reductases in which a CXXXXC motif is conserved. Our mutational analysis revealed the cysteine and threonine combination in SthA leads to better coupling efficiency of transhydrogenation and reduced ROS release compared to enzyme variants with mutated motifs. These results expand our mechanistic understanding of SthA by highlighting reactivity with molecular oxygen and the importance of the evolutionarily conserved sequence motif.