Ab initio DFT quantum chemical methods are applied to study intermediates in the catalytic cycle of soluble methane monooxygenase hydroxylase (MMOH), a dinuclear iron-containing enzyme that converts methane and dioxygen selectively to methanol and water. The quantum chemical models reproduce reliably the X-ray crystallographic coordinates of the active site for the oxidized diiron(III) and reduced diiron(II) states to a high degree of structural precision. The results inspired a reexamination of the X-ray structure of reduced MMOH and revealed previously unassigned electron density now attributed to a key structural water molecule. The quantum chemical calculations required construction of a model containing about 100 atoms, which preserved key hydrogen bonding patterns necessary for structural integrity. Smaller models were unstable for the reduced form of the enzyme, an observation with significant mechanistic implications. The large model was then used to investigate the catalytic intermediates H-peroxo. formed upon the addition of dioxygen, and Q, the active species that reacts with methane. The structures, which differ significantly from alternatives proposed in the literature, are consistent with the experimentally available information concerning the spin states, geometries, and thermodynamics of formation of these intermediates. Other models that have been proposed, particularly in the case of Q, are ruled out in our calculations by energetic considerations, which have a simple physical interpretation. A bound water molecule is critical in assembling the catalytically active species Q.