Among electrically conducting polymers polypyrrole has attracted tremendous attention over the past decade due to the ease of synthesis and relatively lower toxicity. This suggests its wide range of potential applications especially in medical diagnostics. However, conventionally, polypyrrole is been synthesized either electrochemically or chemically using strong oxidants which are often toxic or incompatible with biological systems. More recently it has been shown that oxidative polymerization reactions can be catalyzed by plant peroxidases. Here we report the template-assisted oxidative polymerization of pyrrole using soybean peroxidase in an aqueous non-toxic solvent system. In this study Poly (sodium 4-styrene sulfonate) PSS is used as the polyelectrolyte template that provides water-solubility to the polypyrrole synthesized. PSS also provides the counter-ion for doped conducting polymer. Spectroscopic characterization indicates the formation of an electrically conducting polymer. The polypyrrole that could also be doped and de-doped reversibly exhibits characteristic spectral features similar to those reported for chemically/electrochemically synthesized polymer. Detailed characterization of the polymer formed under various reaction conditions will also be presented. This enzymatic route provides the opportunity to synthesize polypyrrole at a higher pH than reported earlier. The favorable pH combined with aqueous reaction media supports the possibility of extending the use of polypyrrole to applications such as biomedical devices or biosensing where there may be a requirement to synthesize polypyrrole in the presence of the biological entity.