In this ONIOM(QM:MM) study, we evaluate the role of the protein surroundings in the mechanism of H2O2 reduction catalyzed by the glutathione peroxidase enzyme, using the whole monomer (3113 atoms in 196 amino acid residues) as a model. A new optimization scheme that allows the full optimization of transition states for large systems has been utilized. It was found that in the presence of the surrounding protein the optimized active site structure bears a closer resemblance to the one in the X-ray structure than that without the surrounding protein. H2O2 reduction occurs through a two-step mechanism. In the first step, the selenolate anion (E-Se(-)) formation occurs with a barrier of 16.4 kcal/mol and is endothermic by 12.0 kcal/mol. The Gln83 residue plays the key role of the proton abstractor, which is in line with the experimental suggestion. In the second step, the O-O bond is cleaved, and selenenic acid (R-Se-OH) and a water molecule are formed. The calculated barrier for this process is 6.0 kcal/mol, and it is exothermic by 80.9 kcal/mol. The overall barrier of 18.0 kcal/mol for H2O2 reduction is in reasonable agreement with the experimentally measured barrier of 14.9 kcal/mol. The protein surroundings has been calculated to exert a net effect of only 0.70 kcal/mol (in comparison to the "active site only" model including solvent effects) on the overall barrier, which is most likely due to the active site being located at the enzyme surface.