The oxidative decomposition mechanism of the lithium battery electrolyte solvent propylene carbonate (PC) with and without PF6- and ClO4- anions has been investigated using the density functional theory at the B3LYP/6-311++G(d) level. Calculations were performed in the gas phase (dielectric constant epsilon = 1) and employing the polarized continuum model with a dielectric constant epsilon = 20.5 to implicitly account for solvent effects. It has been found that the presence of PF6- and ClO4- anions significantly reduces PC oxidation stability, stabilizes the PC-anion oxidation decomposition products, and changes the order of the oxidation decomposition paths. The primary oxidative decomposition products of PC-PF6- and PC-ClO4- were CO2 and acetone radical. Formation of HF and PF5 was observed upon the initial step of PC-PF6- oxidation while HClO4 formed during initial oxidation of PC-ClO4-. The products from the less likely reaction paths included propanal, a polymer with fluorine and fluoro-alkanols for PC-PF6- decomposition, while acetic acid, carboxylic acid anhydrides, and Cl- were found among the decomposition products of PC-ClO4-. The decomposition pathways with the lowest barrier for the oxidized PC-PF6- and PC-ClO4- complexes did not result in the incorporation of the fluorine from PF6- or ClO4- into the most probable reaction products despite anions and HF being involved in the decomposition mechanism; however, the pathway with the second lowest barrier for the PC-PF6- oxidative ring-opening resulted in a formation of fluoro-organic compounds, suggesting that these toxic compounds could form at elevated temperatures under oxidizing conditions.