By means of scanning tunneling microscopy and density functional theory calculations we demonstrate that on the Rh(110)-(10 x 2)-O surface, a prototypical multiphase surface of an oxidized transition metal model catalyst, water formation upon H2 exposure is a two-step reaction, with each step requiring special active sites. The 1st step initiates at (2 x 1)p2mg-O defect islands in the (10 x 2) structure and propagates across the surface as a reaction front, removing half of the adsorbed oxygen. The oxygen decorated Rh ridges of the (10 x 2) structure lose their tensile strain upon this reduction step, whereby nanoscale patches of clean Rh become exposed and act as special reaction sites in the 2nd reaction step, which therefore initiates homogeneously over the entire surface.