<p>The efficient conversion of alkanes into high-value chemicals remains challenging due to the inert C–H bonds. Mimicking enzymes could provide a green and sustainable approach to address such demanding tasks. Here we found that atomically dispersed hydrophilic Fe–N–C interplayed with hydrophobic microenvironments could be leveraged for concentrating and converting aromatic alkanes using oxidants in aqueous conditions. Specifically, the hydrophilic/hydrophobic Fe–N–C catalysts give an approximate 2-fold enhancement in the turnover frequency (1,107.7 h⁻¹) compared to hydrophilic counterparts (403.8 h⁻¹) in terms of ethylbenzene (EB) oxidation. The hydrophobic microenvironment surrounding the Fe sites markedly diminishes the interfacial water density, which reduces the solvation-free energy of the hydrophobic substrate and promotes the activation and dissociation of <i>tert</i>-butyl hydroperoxide into radicals in water. Consequently, EB reactant is effectively enriched around the atomic Fe sites and is rapidly activated by the generated radicals. This work highlights the potential of engineering a single-atom catalyst microenvironment for efficient and green alkane conversion in aqueous solution.</p>