Factor Inhibiting HIF (FIH) is a Fe(II)-αKG dependent oxygenase that acts as a cellular oxygen sensor in humans. FIH regulates the transcriptional activity of the hypoxia-inducible factor-1 (HIF-1a or HIF), a transcription factor responsible cellular O2 homeostasis. Hydroxylation of the target residue HIF-Asn803, found in the C-terminal transactivation domain (CTAD), inactivates HIF-dependent gene expression. Central to FIH’s function is the activation of O2 after CTAD binding. The mechanistic and structural features of FIH leading to tight coupling between CTAD binding and subsequent O2-activation and reactivity are key for efficient O2 sensing. Our mechanistic studies of WT FIH have revealed inverse solvent isotope effects (SIE) in the steady-state rate constants at limiting concentrations of CTAD or αKG providing direct evidence for aquo release during steady-state turnover. Moreover, the inverse SIEs arise due to a rate-limiting O2 activation step. Characterization of FIH’s O2 activation mechanism using a suite of kinetic probes indicates FIH limits its overall activity through αKG decarboxylation. A key aspect of FIH’s catalytic cycle is that binding and positioning of CTAD precedes O2-activation, yet the means by which CTAD binding stimulates O2 activation is not well understood. The steady-state characterization of five FIH-Gln239 variants tested the role of hydrogen bonding and sterics near the target residue. Coupling ratios indicated a disconnect between O2 activation and CTAD hydroxylation in these variants, whereas WT was tightly coupled. This characterization showed that the proper positioning of HIF-Asn803 by FIH-Gln239 is necessary to suppress uncoupled turnover and to support substrate hydroxylation. The facial triad carboxylate of FIH (Asp201) makes a hydrogen bond to the axial aquo ligand that must be displaced O2 activation to occur. Kinetic pKas observed for Asp201-Gly indicate the H-bond gives stability to the Fe-H2O. Increased autohydroxylation rates were observed for Asp201-Glu compared to WT. New O2 dependent chromophores are observed for Asp201-Gly and Asp201-Ala suggesting this H-bond is crucial to controlling O2 reactivity. Overall, the data suggests FIH’s structure controls O2 activation. Gln239 ensures proper positioning of HIF-Asn803 and Asp201provides stability to the Fe-H2O suppressing autohydroxylation. These structural features allow for FIH to efficiently sense O2 to properly regulate HIF mediated gene transcription.