MoO3 activated under butane and hydrogen mixture at 623 K was tested for the reactions of simultaneous isomerization and dehydrogenation of n-butane at 823 K. The active phase, a mixture of oxycarbide and oxide of molybdenum, was active but unstable under the reaction conditions, i.e. high temperatures and a reducing environment, leading to the formation of a superficial carbide layer and carbon-rich oxycarbide which were active but completely unselective, i.e. 100% selectivity towards methane. The introduction of steam into the feed largely stabilized the catalyst selectivity at around 80% by avoiding the extensive carburization. However, the introduction of steam or oxygen led to a lower dehydrogenation activity by favoring the active phase sintering. Along with sintering an additional deactivation due to coke formation was also observed. This latter deactivation process becomes more pronounced as the hydrogen to hydrocarbon molar ratio decreased. However, the deactivated catalyst can be totally recovered by applying a short oxidative regeneration process at the same reaction temperature.