Drug metabolism of thiophene containing substrates by cytochrome P450s (CYP450) leads to toxic side effects, for example, nephrotoxicity (suprofen, ticlopidine), hepatotoxicity (tienilic acid), thrombotic thrombocytopenic purpura (clopidogrel), and aplastic anemia (ticlopidine). The origin of toxicity in these cases has been attributed to two different CYP450 mediated metabolic reactions: S-oxidation and epoxidation. In this work, the molecular level details of the bioinorganic chemistry associated with the generation of these competitive reactions are reported. Density functional theory was utilized (i) to explore the molecular mechanism for S-oxidation and epoxidation using the radical cationic center Cpd I [(iron(IV)-oxo-heme porphine system with SH(-) as the axial ligand, to mimic CYP450s] as the model oxidant, (ii) to establish the 3D structures of the reactants, transition states, and products on both the metabolic pathways, and (iii) to examine the potential energy (PE) profile for both the pathways to determine the energetically preferred toxic metabolite formation. The energy barrier required for S-oxidation was observed to be 14.75 kcal/mol as compared to that of the epoxidation reaction (13.23 kcal/mol) on the doublet PE surface of Cpd I. The formation of the epoxide metabolite was found to be highly exothermic (-23.24 kcal/mol), as compared to S-oxidation (-8.08 kcal/mol). Hence, on a relative scale the epoxidation process was observed to be thermodynamically and kinetically more favorable. The energy profiles associated with the reactions of the S-oxide and epoxide toxic metabolites were also explored. This study helps in understanding the CYP450-catalyzed toxic reactions of drugs containing the thiophene ring at the atomic level.