The reaction mechanism of cellobiose dehydrogenase (CDH) from Phanerochaete chrysosporium, adsorbed on graphite electrodes, was investigated by following its catalytic reaction with cellobiose registered in both direct and mediated electron transfer modes between the enzyme and the electrode. A wall-jet flow through amperometric cell housing the CDH-modified graphite electrode was connected to a single line flow injection system. In the present study, it is proven that cellobiose, at concentrations higher than 200 μM, competes for the reduced state of the FAD cofactor and it slows down the transfer of electrons to any 2e−/H+ acceptors or further to the heme cofactor, via the internal electron transfer pathway. Based on and proven by electrochemical results, a kinetic model of substrate inhibition is proposed and supported by the agreement between simulation of plots and experimental data. The implications of this kinetic model, called pseudo-ping-pong mechanism, on the possible functions CDH are also discussed. The enzyme exhibits catalytic activity also for lactose, but in contrast to cellobiose, this sugar does not inhibit the enzyme. This suggests that even if some other substrates are coincidentally oxidized by CDH, however, they do not trigger all the possible natural functions of the enzyme. In this respect, cellobiose is regarded as the natural substrate of CDH.