Lithium-rich oxide electrodes with layered structures have attracted considerable interest because they can deliver high energy densities for lithium-ion batteries. However, there is significant debate regarding their redox chemistry. It is apparent that the mechanism of lithium extraction from lithium-rich Li2MnO3 is not fully understood, especially in relation to the observed O2 evolution and structural transformation. Here, delithiation and kinetic processes in Li2MnO3 are investigated using ab initio simulation techniques employing high level hybrid functionals as they reproduce accurately the electronic structure of oxygen hole states. We show that Li extraction is charge-compensated by oxidation of the oxide anion, so that the overall delithiation reaction involves lattice oxygen loss. Localized holes on oxygen (O-) are formed as the first step but are not stable leading to oxygen dimerization (with O-O ∼ 1.3 Å) and eventually to the formation of molecular O2. Oxygen dimerization facilitates Mn migration onto octahedral sites in the vacated lithium layers. The results suggest that reversible oxygen redox without major structural changes is only possible if the localized oxygen holes are stabilized and oxygen dimerization suppressed. Such an understanding is important for the future optimization of new lithium-rich cathode materials for high energy density batteries.