Heme degradation by heme oxygenase (HO) enzymes is important in maintaining iron homeostasis and prevention of oxidative stress, etc. In response to mechanistic uncertainties, we performed quantum mechanical/molecular mechanical investigations of the heme hydroxylation by HO, in the native route and with the oxygen surrogate donor H2O2. It is demonstrated that H2O2 cannot be deprotonated to yield (FeOOH)-O-III, and hence the surrogate reaction starts from the FeHOOH complex. The calculations show that, when starting from either (FeOOH)-O-III or (FeHOOH)-H-III, the fully concerted mechanism involving O-O bond breakage and O-C-meso bond formation is highly disfavored. The low-energy mechanism involves a nonsynchronous, effectively concerted pathway, in which the active species undergoes first O-O bond homolysis followed by a barrier-free (small with (FeHOOH)-H-III) hydroxyl radical attack on the meso position of the porphyrin. During the reaction of (FeHOOH)-H-III, formation of the Por(+center dot)Fe(IV)=O species, compound I, competes with heme hydroxylation, thereby reducing the efficiency of the surrogate route. All these conclusions are in accord with experimental findings (Chu, G. C.; Katakura, K.; Zhang, X.; Yoshida, T.; Ikeda-Saito, M. J. Biol. Chem. 1999, 274, 21319). The study highlights the role of the water cluster in the distal pocket in creating "function" for the enzyme; this cluster affects the O-O cleavage and the O-C-meso formation, but more so it is responsible for the orientation of the hydroxyl radical and for the observed alpha-meso regioselectivity of hydroxylation (Ortiz de Montellano, P. R. Acc. Chem. Res. 1998, 31, 543). Differences/similarities with P450 and HRP are discussed.