Li-rich layered oxides (LLOs) are attractive cathode materials for high-energy–density lithium-ion batteries. However, the aggregation of Li2MnO3-like domains causes critical issues such as capacity/voltage fading and structural transformation. Here, we design the Co-free Li-rich Li-Fe–Ni-Mn–O system with dispersed Li2MnO3-like domains (D–LFNMO) and aggregated Li2MnO3-like domains (A–LFNMO) to investigate the effect of Li2MnO3-like domain sizes on structures and oxidation process using density function theory (DFT) calculations. Structural stability is finished through calculating oxygen release energies and migration energies of Mn4+ ions. The oxidation mechanism of oxygen was explored. Uniquely, in the Li-rich Li-Fe–Ni-Mn–O system, O ions in the linear Fe–O-Li configuration are activated to participate into charge compensation. The Fe-doping and especially dispersed Li2MnO3-like domains trigger more lattice oxygen ions to avoid the peroxidation of lattice oxygen and suppress the oxygen release. The climbing image nudged elastic band (CI–NEB) calculations find that dispersed Li2MnO3-like domains hinder the migration of Mn4+ ions to Li-vacancies to form irreversible structures. Consequently, LLOs with dispersed Li2MnO3-like domains would possess highly reversible oxygen redox and excellent structural stability, and exhibit superior cycling stability of high capacity. The findings provide new perspectives and concepts for designing high-energy Li-rich cathodes.Graphical Abstract: