Propylene oxide (PO) is an important bulk chemical used for synthesis of many value-added products. Much effort has been devoted to finding a simple and "green" process for PO production. Promising results in terms of activity and selectivity have been achieved for propylene oxidation on supported gold catalysts with a mixture of O-2 and H-2 or with O-2 and H2O. In this work a detailed transformation network of competitive reaction pathways following the initial steps of oxidation has been studied theoretically using density functional theory (DFT). The results of calculations question some of the earlier assumptions regarding the mechanism of PO formation. Surface hydroperoxo species (OOH) formed in situ are shown to be responsible for the high selectivity of propylene epoxidation with O-2 on gold-based catalysts using hydrogen or water as co-reactants. (C) 2016 Elsevier B.V. All rights reserved.