The aggregation of Li2MnO3‐like domains in Li‐rich layered oxides (LLOs) causes severe capacity/voltage fading, which seriously impedes their commercial applications. Here, we design Co‐free Li‐rich LiFeNiMnO system with dispersed small‐sized Li2MnO3–like domains (D‐LFNMO) and aggregated Li2MnO3‐like domains (A‐LFNMO) to investigate effects of Li2MnO3‐like domain sizes and Fe content on structures and oxidation process using density function theory (DFT) calculations. De‐lithiation structures, structural stability and oxidization mechanism of lattice oxygen ions are explored. Structural stability is finished through calculating oxygen release energies and migration energy barriers of Mn4+ ions based on a climbing image nudged elastic band (CI–NEB) method. Research shows that LLOs with dispersed small‐sized Li2MnO3‐like domains and the moderate Fe content would possess highly reversible oxygen redox and excellent structural stability and would exhibit superior cycling stability of high capacity. The findings provide new perspectives and concepts for designing high‐energy Li‐rich cathodes.