The catalytic reaction of myo-inositol oxygenase, a nonheme diiron enzyme, is initiated by the binding of an O(2) molecule to the ferrous center of a mixed-valence Fe(II)Fe(III) intermediate. This generates a (superoxo)Fe(Ill)Fe(III) reactive species that abstracts a hydrogen atom from the myo-inositol substrate. To understand the effects of protein environment and intracluster dispersion on this O(2)-binding process, we undertook a combined ONIOM(B3LYP:AMBER) and energy decomposition analysis. The interaction energy between the active site and the thousands of atoms present in the protein environment was decomposed into electrostatic, van der Waals (vdW) and polarization terms. These terms were further decomposed into contributions from individual amino acid residues. The dispersion effect, which is not adequately accounted for by the B3LYP method, was estimated in an empirical manner. The results show that the electrostatic, vdW, and polarization effects slightly enhance the O(2) binding process. The dispersion effect enhances O(2) binding more significantly than these effects. Despite these stabilizing effects, the entropy effect disfavors O(2) binding, making the process almost thermoneutral. .