An electronic structure analysis is provided of the action of solvated FeO(2+), [FeO(H(2)O)(5)](2+), as a hydroxylation catalyst. It is emphasized that the oxo end of FeO(2+) does not form hydrogen bonds (as electron donor and H-bond acceptor) with H-bond donors nor with aliphatic C-H bonds, but it activates C-H bonds as an electron acceptor. It is extremely electrophilic, to the extent that it can activate even such poor electron donors as aliphatic C-H bonds, the C-H bond orbital acting as electron donor in a charge transfer type of interaction. Lower lying O-H bonding orbitals are less easily activated. The primary electron accepting orbital in a water environment is the 3sigma*alpha orbital, an antibonding combination of Fe-3d(z(2)) and O-2p(z), which is very low-lying relative to the pi*alpha compared with, for example, the sigma* orbital in O(2) relative to its pi*. This is ascribed to relatively small Fe-3d(z(2)) with O-2p(z) overlap, due to the nodal structure of the 3d(z(2)).The H-abstraction barrier is very low in the gas phase, but it is considerably enhanced in water solvent. This is shown to be due to strong screening effects of the dielectric medium, leading to relative destabilization of the levels of the charged [FeO(H(2)O)(5)](2+) species compared to those of the neutral substrate molecules, making it a less effective electron acceptor. The solvent directly affects the orbital interactions responsible for the catalytic reaction.