Density functional theory (DFT) calculations have been performed to gain insight into the mechanism of hydrocarbonylation of propylene and the origin of regio- and chemoselectivity. It is shown that the most feasible mechanism involves five steps: (i) decomposition of acetic formic anhydride, (ii) hydropalladation of propylene, (iii) CO migratory insertion, (iv) iodide-assisted acetate-formate exchange, and (v) formylation or carboxylation. Importantly, carboxylation proceeds via the decomposition of butyric formic anhydride followed by hydride-butyryloxy reductive elimination instead of the direct hydrolysis of anhydride. With such a mechanism, the apparent barriers of the catalytic cycles are calculated to be around 20.0 kcal/mol, which are consistent with the mild conditions (80 °C) at which the catalytic reactions operate. For phosphine-ligated palladium catalysis, on one hand, linear Pd-alkyl species was formed as the major intermediate through 2,1-hydropalladation, in which transition state suffers weak H···H steric hindrance. On the other hand, the high chemoselectivity for the aldehyde is ascribed to increased π back-donation effect and noncovalent interactions, which stabilize the transition state and hence reduce the energy barrier. For ferrocenyl phosphine-ligated palladium catalysis, the smaller energy span of carboxylation than formylation indicates that carboxylation is preferred for the carboxylic acid releasing.