The mechanisms of olefin epoxidation by hydrogen peroxide catalyzed by [gamma-1,2-H2SiV2W10O40](4-), 1, were studied using the density functional (B3LYP) approach in conjunction with large basis sets. The role of solvent is taken into account via both including an explicit water molecule into the calculations and using the polarizable continuum model (PCM) with acetonitrile as a solvent (numbers given in parentheses). The countercation effect (using one molecule of Me4N+ as a countercation (1CC)) is also taken into account (numbers given in brackets). It was shown that the formation of the vanadium-hydroperoxo species 2(H2O) with an {OV-(mu-OOH)(mu-OH)-VO}(H2O) core from 1 and H2O2 is a very facile process. The resulting complex 2(H2O) may eliminate a water molecule and form complex 2. From the intermediates 2 and 2(H2O), reaction may proceed via two distinct pathways: "hydroperoxo" and "peroxo". The water-assisted "hydroperoxo" pathway starts with coordination of olefin (C2H4) to 2(H2O) and proceeds with a 36.8(25.5)[31.7][(21.6)] kcal/mol rate-determining barrier at the O-atom transfer transition state TS2[TS2(1cc)]. The "water-free peroxo" and "water-assisted peroxo" pathways start with rearrangement of 2 and 2(H2O) to vanadium-peroxo' species 3 and 3(H2O), respectively, with an {OV-(eta(2) -O-2)-VO} core, and follow the O-atom transfer from catalyst to olefin. The 2 -> 3 and 2(H2O) -> 3(H2O) hydroperoxo -peroxo rearrangement processes require 16.8(13.0)(13.0][(11.1)] and 14.2(9.0)[1.3][(7.2)] kcal/mol of energy, respectively. The calculated overall energy barriers are 28.1(19.1)[23.8][(17.2)] and 25.4(11.0)[10.6][(13.0)] kcal/mol for "water-free peroxo" and "water-assisted peroxo" pathways, respectively. On the basis of these data we predict that the [gamma-1,2-H2SiV2W10O40](4-)-catalyzed olefin epoxidation by H2O2 most likely occurs via a "water-assisted peroxo" pathway.