We have studied the early phase of the S-2 -> S-3 transition in the oxygen-evolving complex (OEC) of photosystem II using the hybrid density functional theory with a quantum mechanical model composed of 338-341 atoms. Special attention is given to the vital role of water molecules in the vicinity of the Mn4CaO5 core. Our results demonstrate how important the dynamic behavior of surrounding water molecules is in mediating critical chemical transformations such as binding and deprotonation of substrates and hydration of the catalytic site and identify a strong coupling of water-chain relocation near the redox-active tyrosine residue Tyr161 (Tyr(Z)) with oxidation of the Mn4CaO5 cluster by Tyr(Z)center dot(+). The oxidation reaction is further promoted when the catalytic site is more solvated by water. These results indicate the importance of surrounding water molecules in biological catalysts as they ultimately lead to effective catalytic function and/or favorable electron-transfer dynamics.