The O-O coupling process in water oxidation on the gamma FeOOH hydroxide catalyst is simulated by means of density functional theory using model iron cubane cluster Fe4O4(OH)4. A key reactive intermediate is proposed to be the HO-FeIV-O• oxyl unit with terminal oxo radical. The “initial” vertex FeIII(OH) moiety forms this intermediate at the calculated overpotential of 0.93 V by adding one water molecule and withdrawing two proton–electron pairs. The O-O coupling goes via water nucleophilic attack on the oxyl oxygen to form the O-O bond with a remarkably low barrier of 11 kcal/mol. This process is far more effective than alternative scenario based on direct interaction of two ferryl FeIV-O sites (with estimated barrier of 36 kcal/mol) and is comparable with the coupling between terminal oxo center and three-coordinated lattice oxo center (12 kcal/mol barrier). The process of hydroxylation of terminal oxygen inhibits the O-O coupling. Nevertheless, being more effective for ferryl oxygen, the hydroxylation in fact enhances selectivity of the O-O coupling initiated by the oxyl oxygen.