The mechanism of the full catalytic cycle for unsaturated fatty acids peroxidation by lipoxygenase has been studied by means of hybrid density functional theory (DFT-B3LYP). The model of the active site in lipoxygenase comprises iron ion coordinated by six-molecule model of the native protein and aqua ligands. Formic anion and formamide are employed to model isoleucine and asparagine, respectively. Histidine ligands are modeled by ammonia molecules. In regards to the substrate, a 2,5-heptadiene molecule is used to model the unsaturated hydrocarbon chain of fatty acids. Our results indicate that the first catalytic step consists of a hydrogen atom transfer from the hydrocarbon to the hydroxide group bound to ferric ion. This process proceeds through an early transition state with the activation energy amounting to 12.1 kcal/mol and the reaction energy being -12.6 kcal/mol. In the next step, the activated substrate, in the form of the diene radical, reacts with a triplet oxygen molecule in an exoergic (-7.8 kcal/mol) process characterized by small activation energy (2.0 kcal/mol). The possibility of an organo-iron intermediate formation has been ruled out by the fact that such a complex is unstable irrespective of the spin state assumed. Similarly, the reduced form of the active site seems not to bind molecular oxygen to any perceptible extent, which in turn remains at variance with the mechanism assuming molecular oxygen activation. The last step of the catalytic reaction involves the peroxy radical reduction by the ferrous form of the active site in lipoxygenase. This process is almost isoenergetic (0.3 kcal/mol) and completes the catalytic cycle. Two possible mechanisms of this last step are discussed with particular attention on the possible catalytic relevance of the so-called purple form.