In this article, quantum mechanical/molecular mechanical (QM/MM) methods were used to study the full catalytic mechanism of xanthine oxidase (XO). XO catalyzes the conversion of xanthine (XAN) to uric acid (URC), in the presence of a molybdenum cofactor (Moco). The mechanism occurs through four reaction steps. Initially, the proton from the hydroxyl group of Moco passes to Glu1261 and the activated hydroxyl group makes a nucleophilic attack on XAN. Then, a hydride is transferred from the tetrahedral intermediate to the sulfur atom of the Moco, reducing Mo(vi) to Mo(iv). In the third step, one molecule of URC is formed through its protonation by Arg880. Once this reaction is complete, FAD is reduced to FADH2, oxidizing Mo(iv) to its initial oxidation state of Mo(vi). The enzymatic turnover is achieved with the reaction of one water molecule with the Moco. The rate-limiting step of the full catalytic mechanism is the hydride transfer that requires a free activation barrier of 16.9 kcal mol-1, which closely agrees with the experimental kcat value (18.3 s-1), which corresponds to approximately 15.7 kcal mol-1. This work also elucidates the key role played by Arg880 in the catalytic mechanism and the importance of Glu802 in the binding of the substrate. Both residues were previously shown to be important by mutagenesis studies, but their role was still not clearly understood. Additionally, it was observed that the presence of a tunnel of water molecules located close to Moco and Glu1261 is important for the enzymatic turnover. The determined transition state structures can now be used to help the development of transition-state analog inhibitors targeting XO.