Activation of propane over Li/MgO catalyst has been investigated. It is shown that a small fraction of the oxygen ions in Li/MgO catalysts can be removed from the catalyst by reduction treatment in H2 at 600 °C. Catalytic activity of Li/MgO exhibits a strong correlation to the amount of oxygen that is removed. It is proposed that the sites containing removable oxygen are responsible for the activation of propane. About 70 propane molecules were converted after consumption of one such oxygen site, in the absence of gas-phase oxygen, implying a mechanism in which propane molecules are activated on the catalyst resulting in propyl radicals that are released to the gas phase where they undergo chain propagation reactions, resulting in the products observed. The active O site is consumed by conversion into an OH group, as the oxygen is not removed from the catalyst with propane. The oxidative conversion of propane over Li/MgO catalysts follows a mixed heterogeneous-homogeneous radical chemistry where the catalyst acts as an initiator. At low propane partial pressures (0.1 bar), the catalyst surface area to volume ratio of the catalytic reactor does not influence the chain length in the propagation step. At higher propane partial pressures (>0.3 bar), favoring extensive gas-phase reactions, the catalyst affects conversion and selectivity also via quenching and chain termination.