In this paper, we use first principles quantum mechanical methods (B3LYP flavor of Density Functional Theory) to examine the mechanism of selective oxidation and ammoxidation of propene by BiMoOx catalysts. To do this, we use finite clusters chosen to mimic likely sites on the heterogeneous surfaces of the catalysts. We conclude that activation of the propene requires a Bi(V) site, whereas all subsequent reactions involve di-oxo Mo(VI) sites adjacent to the Bi. We find that two such Mo sites are required for the most favorable reactions. These results are compatible with current experimental data. For ammoxidation, we conclude that ammonia activation would be easier on Mo(IV) rather than on Mo(VI). Ammonia would be activated more easily for more reducing condition. Because ammonia and propene are reducing agents, higher partial pressures of them could accelerate the ammonia activation. This is consistent with the kinetic model of ammoxidation proposed by Grasselli and co-workers that imido sites (Mo=NH) are more abundant in higher partial pressures of feed. Our calculations also indicate that allyl groups produced as a result of the hydrogen abstraction from propenes would be adsorbed more easily on imido groups (Mo=NH) than on oxo groups (Mo=O) and that the spectator oxo effect is larger than spectator imido effect. Thus, we propose that the best site for ammoxidation (at least for allyl adsorption) is the imido group of the "oxo-imido" species.