The caging effect of the host environment on photochemical reactions of molecular oxygen is investigated using monochromatic synchrotron radiation and spectrally resolved fluorescence. Oxygen doped clusters are formed by coexpansion of argon and oxygen, by pickup of molecular oxygen or by multiple pickup of argon and oxygen by neon clusters. Sequential pickup provides radially ordered core-shell structures in which a central oxygen molecule is surrounded by argon layers of variable thickness inside large neon clusters. Pure argon and core-shell argon-neon clusters excited with approximately 12 eV monochromatic synchrotron radiation show strong fluorescence in the vacuum ultraviolet (vuv) spectral range. When the clusters are doped with O2, fluorescence in the visible (vis) spectral range is observed and the vuv radiation is found to be quenched. Energy-resolved vis fluorescence spectra show the 2 1Sigma+-->1 1Sigma+(ArO(1S)-->ArO(1D)) transition from argon oxide as well as the vibrational progression A '3Delta u(nu'=0)-->X 3Sigmag*(nu") of O2 indicating that molecular oxygen dissociates and occasionally recombines depending on the experimental conditions. Both the emission from ArO and O2 as well the vuv quenching by oxygen are found to depend on the excitation energy, providing evidence that the energy transfer from the photoexcited cluster to the embedded oxygen proceeds via the O2+ ground state. The O2+ decays via dissociative recombination and either reacts with Ar resulting in electronically excited ArO or it recombines to O2 within the Ar cage. Variation of the Ar layer thickness in O2-Ar-Ne core-shell clusters shows that a stable cage is formed by two solvation layers.