Theoretical calculations have been performed to investigate mechanistic features of OH-initiated oxidation reactions of toluene. Aromatic peroxy radicals arising from initial OH and subsequent O-2 additions to the toluene ring are shown to cyclize to form bicyclic radicals rather than undergoing reaction with NO under atmospheric conditions. Isomerization of bicyclic radicals to more stable epoxide radicals possesses significantly higher barriers and, hence, has slower rates than O-2 addition to form bicyclic peroxy radicals. At each OH attachment site, only one isomeric pathway via the bicyclic peroxy radical is accessible to lead to ring cleavage. The study provides thermochemical and kinetic data for quantitative assessment of the photochemical production potential of ozone and formation of toxic products and secondary organic aerosol from toluene oxidation.