The hydroxyethylphosphonate dioxygenase (HEPD) catalyzes the critical carbon-carbon bond cleavage step in the phosphinothricin (PT) biosynthetic pathway. The experimental research suggests that water molecules play an important role in the catalytic reaction process of HEPD. This work proposes a water involved reaction mechanism where water molecules serve as an oxygen source in the generation of mononuclear nonheme iron oxo complexes. These molecules can take part in the catalytic cycle before the carbon-carbon bond cleavage process. The properties of trapped water molecules are also discussed. Meanwhile, water molecules seem to be responsible for converting the reactive hydroxyl radical group (-OH) to the ferric hydroxide (Fe(III)-OH) in a specific way. This converting reaction may prevent the enzyme from damages caused by the hydroxyl radical groups. So, water molecules may serve as biological catalysts just like the work in the heme enzyme P450 StaP. This work could provide a better interpretation on how the intermediates interact with water molecules and a further understanding on the O-18 label experimental evidence in which only a relatively smaller ratio of oxygen atoms in water molecules (similar to 40%) are incorporated into the final product HMP.