In the present paper, the reaction mechanism corresponding to activation of hydrogen peroxide (H2O2) by a divanadium–substituted polyoxometalate (POM) [γ–PV2W10O38(μ–OH)2]3– (I) to form catalytic active species, peroxo complex [γ–PV2W10O38(μ-η2,η2–O2)]3– (III), was studied by using the density functional theory (DFT) calculations method with B3LYP functional. The results indicate that coordination of H2O2 to I proceeds via a vanadium–center–assisted proton transfer pathway to remove the first water molecule and form a hydroperoxy intermediate [γ–PV2W10O38(μ–OH) (μ–OOH)]3– (II). And intermediate II occurs through three successive water–assisted proton transfer steps to remove the second water molecule and finally forms catalytic active species. The calculated overall energy profiles show that coordination of H2O2 to vanadium center requires a proton transfer barrier of about 24 kcal mol−1. A detailed comparison of molecular geometries and electronic structure shows that the catalytic active species has a very interesting structural feature, where a superoxide radical (O2−) was embedded into two vanadium centers, and may be a potential nucleophile. The unique withdrawing electron properties and flexible bonding ability of the γ–Keggin–type POM ligand contribute to the formation of O2− radical. The tunable alternate arrangement of W–O bond series in γ–Keggin–type POM ligand contributes to the flexibility of the γ–Keggin–type POM ligand. Meanwhile, our DFT calculations show a good performance of B3LYP-gauge-independent atomic orbital (IGAIM) method for the calculation of 1H NMR parameters of divanadium-substituted phosphotungstate.