The use of quantum chemical approaches in the description of electronic properties of a catalyst and in understanding the mechanism of catalytic reactions is discussed. The electronic structure of vanadium pentoxide, V2O5, is studied based upon the cluster model with ab initio DFT and semiempirical INDO-type methods. Inter-atomic binding in vanadium pentoxide is determined to be of a mixed ionic and covalent character. Convergence of the electronic properties with respect to the cluster size is achieved for clusters as large as V10O31H12. Similar electronic parameters of the V10O31H12 cluster in its idealized, bulk and optimized geometry are obtained. The effect of the second substrate layer on the electronic properties is found to be negligible. The calculations reveal differences in the catalytic properties between structurally inequivalent surface oxygen centers and show the increased local reactivity of bridging oxygens with respect to the electrophilic adparticles. The results of the adsorption of hydrogen, treated as a probe reaction to model the first step in the selective oxidation of hydrocarbons at structurally different oxygen sites, are compared with the adsorption/activation of aliphatic (propene) and aromatic (toluene) hydrocarbons at the vanadium pentoxide(010) surface. The H/H+ species adsorbs at the V2O5(010) surface always at oxygen sites forming stable surface hydroxyl groups. The detailed mechanism of H/H+ stabilization depends on the structural and electronic properties of the adsorption site. The strongest binding occurs with the oxygen O(c) bridging two ban vanadium atoms. These O(c) oxygens become quite mobile in presence of the H/H+ adparticle. Oxidation of propene and toluene on V2O5(010) into the aldehyde species proceeds through the formation of C-O bond with the bridging oxygen, abstraction of two hydrogen atoms from the same carbon atom of CH3-group, and generation of two OH-surface groups.