This study uses density functional theory (DFT) simulations to predict the main pathways by which hydroxyl (OH) radicals oxidize phenol into monohydroxylated products during an electrical discharge directly in or contacting water. The calculated activation energies and reaction rate constants indicate that phenol ring H abstraction is less likely to occur than OH addition, which will be the fastest in the ortho and para positions. The chain propagation with molecular oxygen of such formed ortho and para radicals will result in the production of hydroquinone and catechol, which are, concurrently, the most likely products of phenol degradation by OH radicals. Electron transfer reactions between dihydroxycyclohexadienyl radicals and plasma oxidative species are another important reaction mechanism which may be contributing significantly to the formation of products. Good agreement between computed kinetic and experimental data demonstrates the feasibility of applying DFT to investigate chemical reaction mechanisms.