Steamed zeolites exhibit improved catalytic properties for hydrocarbon activation (alkane cracking and dehydrogenation). The nature of this practically important phenomenon has remained a mystery for the last six decades and was suggested to be related to the increased strength of zeolitic Bronsted acid sites after dealumination. We now utilize state-of-the-art infrared spectroscopy measurements and prove that during steaming, aluminum oxide clusters evolve (due to hydrolysis of Al out of framework positions with the following clustering) in the zeolitic micropores with properties very similar to (nano) facets of hydroxylated transition alumina surfaces. The Bronsted acidity of the zeolite does not increase and the total number of Bronsted acid sites decreases during steaming. O5Al(VI)-OH surface sites of alumina clusters dehydroxylate at elevated temperatures to form penta-coordinate Al1O5 sites that are capable of initiating alkane cracking by breaking the first C-H bond very effectively with much lower barriers (at lower temperatures) than for protolytic C-H bond activation, with the following reaction steps catalyzed by nearby zeolitic Bronsted acid sites. This explains the underlying mechanism behind the improved alkane cracking and alkane dehydrogenation activity of steamed zeolites: heterolytic C-H bond breaking occurs on Al-O sites of aluminum oxide clusters confined in zeolitic pores. Our findings explain the origin of enhanced activity of steamed zeolites at the molecular level and provide the missing understanding of the nature of extra-framework Al species formed in steamed/dealuminated zeolites.