The structural and electronic properties of bismuth oxide clusters of stoichiometry Bi3Oy+ (y = 3, 4, 5, 6) (y = 6, 7, 8) as well as their interaction with ethene have been investigated using an accurate ab initio density functional approach. The aim of this work is to determine mechanisms under which the metal oxide clusters can invoke transfer of oxygen atoms to unsaturated organic substrates leading to oxygenated compounds. Our findings show that stable bismuth oxide clusters such as Bi3O4+ oxidize ethene only in the presence of molecular oxygen. This means that transfer of oxygen atoms from the cluster framework does not occur due to strong Bi-O bonding. We identified the (Bi4O6+)C2H4 complex with a radical center located at a carbon atom which allows the molecular oxygen to form "superoxide" (Bi4O6+)C2H4-02 species and permits addition of another ethene to form the peroxide (Bi(4)0(6)(+))C2H4-O2C2H4 These findings support experimental results of the accompanying paper in this issue. Moreover, we found that an oxirane molecule can be released from the peroxide form, allowing the formation of reactive chain units (Bi4O6+)-(C2H4-O) which might be an interesting species for studying the role of bismuth oxide clusters in catalytic processes.