The direct and selective introduction of hydroxyl group into aromatic compounds remains one of the challenging problems in oxidation chemistry. Keeping in view the reported reactivity of vanadium oxide in C-H activation of saturated hydrocarbons, the study explores the reactivity of neutral V4O10 cluster with benzene through rigorous computations performed within the formalism of density functional theory. Three possible reaction channels for the reactivity of V4O10 cluster with benzene have been deciphered, and comprehensive understanding of all possible mechanistic pathways has been obtained by analysis of all the intermediates and transition states encountered en route. The study provides promising evidence of direct abstraction of hydrogen by terminal oxygen of the cluster via three-centered transition state. The scan of potential energy surfaces for the reactivity of the cluster in its ground (singlet) and first excited (triplet) spin multiplicity states establishes two-state reactivity mechanisms The spin crossover point has been identified through geometric and thermodynamic parameters, partial charges, and intrinsic reaction coordinate calculations. The study establishes the efficacy of V4O10 cluster species in direct hydroxylation of benzene to phenol.