For a knot K in S, let T(K) be the characteristic toric sub-orbifold of the orbifold (S, K) as defined by Bonahon-Siebenmann. If K has unknotting number one, we show that an unknotting arc for K can always be found which is disjoint from T(K), unless either K is an EM-knot (of Eudave-Muñoz) or (S,K) contains an EM-tangle after cutting along T(K). As a consequence, we describe exactly which larg...