Chlorite dismutase (Cld) is a heme-dependent enzyme that catalyzes the decomposition of toxic chlorite (ClO₂⁻) into innocuous chloride and O₂. In this paper, using the hybrid B3LYP density functional theory (DFT) method including dispersion interactions, the Cld reaction mechanism has been studied with a chemical model constructed on the X-ray crystal structure. The calculations indicate that the reaction proceeds along a stepwise pathway in the doublet state, i.e. a homolytic O–Cl bond cleavage of the substrate leading to an O–Fe(heme) species and a ClO˙ radical, followed by a rebinding O–O bond formation between them. The O–Fe(heme) species is demonstrated to be a low-spin triplet-state Fe(IV)O diradicaloid. A low-spin singlet-state Fe(IV)O is much less stable than the former, with an energy difference of 9.2 kcal mol⁻¹. The O–Cl bond cleavage is rate-limiting with a barrier of 10.6 kcal mol⁻¹, in good agreement with the experimental reaction rate of 2.0 × 10⁵ s⁻¹. Furthermore, a heterolytic O–Cl bond dissociation in the initial step is shown to be unreachable, which ensures the high efficiency of the Cld enzyme by avoiding the generation of chlorate byproduct observed in the reactions of synthetic Fe porphyrins. Also, the pathways in the quartet and sextet states are unfavorable for the Cld reaction. The present results reveal a detailed mechanism III (defined in the text) including an interesting di-radical intermediate composed of a low-spin triplet-state Fe(IV)O and a ClO˙ radical. Compared to a competitive heterolytic Cl–O cleavage in synthetic Fe porphyrins, the revelation of the domination of homolysis in Cld indicates not only the high efficiency of enzyme, but also the sensitivity of a heme and the significance of the enzymatic active-site surroundings (the His170 and Arg183 residues in the present case), which gives more insights into heme chemistry.