Doping with Fe boosts the electrocatalytic performance of NiOOH for the oxygen evolution reaction (OER). To understand this effect, we have employed state-of-the-art electronic structure calculations and thermodynamic modeling. Our study reveals that at low concentrations Fe exists in a low-spin state. Only this spin state explains the large solubility limit of Fe and similarity of Fe-O and Ni-O bond lengths measured in the Fe-doped NiOOH phase. The low-spin state renders the surface Fe sites highly active for the OER. The low-to-high spin transition at the Fe concentration of ~ 25% is consistent with the experimentally determined solubility limit of Fe in NiOOH. The thermodynamic overpotentials computed for doped and pure materials, η = 0.42 V and 0.77 V, agree well with the measured values. Our results indicate a key role of the low-spin state of Fe for the OER activity of Fe-doped NiOOH electrocatalysts.