Transformational increases in the storage capacity of battery cathodes could be achieved by tapping into the redox activity at oxide ligands in addition to conventional transition metal couples. Yet the key signatures that govern such lattice oxygen redox (LOR) have not been ascertained. Li₃IrO₄ has the largest reversible LOR, rendering it a unique model system. Here, X-ray spectroscopy and computational simulations reveal that LOR in Li₃IrO₄ is selectively compensated via O sites with 3 lone pairs, which are activated by Li/Ir disorder. The 2-electron LOR can be reversed to regenerate the initial state without unlocking competing bulk reactions observed in many other compounds. We uncover an intricate interplay between stoichiometry, O coordination and non-bonding states in LOR and pinpoint spectroscopic signatures. This interplay is indispensable to design materials with 3d metals that fulfill the promise of LOR to overcome the bottlenecks of current cathodes for future implementation in practical batteries.