An Fe(II) ion at an alpha-cation exchange position of ZSM-5 zeolite (Fe/Z) was taken as a model for the active site in the nitrous oxide decomposition and in the selective oxidation of phenol with nitrous oxide. The oxygen deposited by decomposition of N2O is commonly referred to as alpha-oxygen (OFe/Z). Cluster model DFT calculations show that the interaction of the OFe/Z center with benzene resulted easily in arene oxide formation. he results indicate a rather low activation energy for this step. Possible transformations of the adsorbed arene oxide are considered and the experimental evidence for the absence of the kinetic H/D isotope effect in phenol formation is discussed. It is concluded that the rate-limiting step for the in situ oxidation of benzene to phenol is the desorption of the product.