Density functional calculations are used to elucidate the reaction mechanism of water oxidation catalyzed by iron tetraamido macrocyclic ligand (TAML) complexes. The oxidation of the starting TAML–Fe3+–OH2 complex by removing three electrons and two protons leads to the formation of a key intermediate, TAML·–Fe5+=O, which can undergo nucleophilic attack by either a water molecule or a nitrate ion. Both pathways involve attack on the oxo group and lead to the production of O2. The water attack is more favoured and has a total barrier of 15.4 kcal/mol. The alternative nitrate attack pathway has a barrier of 19.5 kcal/mol. Nitrate functions as a cocatalyst by first donating an oxygen atom to the oxo group to form O2 and a nitrite ion, which can then be re-oxidized to regenerate a nitrate ion. Three possible competing pathways result in ligand modification, namely, water and nitrate attack on the ligand, as well as ligand amide oxidation. The water attack on the ligand has a low barrier of only 10.9 kcal/mol and leads to the opening of the benzene ring, which explains the observation of fast catalyst degradation. The lack of activity or lower activity of other catalysts with different substituents is also rationalized.