FeFe hydrogenases are the most efficient H2 producing enzymes, but inactivation by O2 is an obstacle to using them in biotechnological devices. Here we combine electrochemistry, site-directed mutagenesis, molecular dynamics and quantum chemical calculations to uncover the molecular mechanism of O2 diffusion within the enzyme and its reactions at the active site. We find that the partial reversibility of the reaction with O2 results from the four-electron reduction of O2 to water. The third electron/proton transfer step is the bottleneck for water production, competing with formation of the highly reactive OH radical and hydroxylated cysteine, consistent with recent crystallographic evidence. The rapid delivery of electrons and protons to the active site is therefore crucial to prevent the accumulation of these aggressive species at prolonged O2 exposure. These findings should provide important clues for the design of hydrogenase mutants with increased resistance to oxidative damage.