Applications of nitrous oxide (N2O) as an oxidant in green propellants and propulsion systems have attracted a lot of attention. In this study, the reaction pathways for the oxidation of ammonia (NH3) with N2O were studied using the B3LYP/6-31++G** method of density functional theory (DFT). The results reveal that the reaction between N2O and NH3 proceeds through a chain reaction mechanism. N2O reacts with NH3 to form N2 and NH3O first and then NH3O decomposes into NH3 and O. This process corresponds to the apparent reaction N2O+M=N2+O+M (M=NH3), but the energy barrier of the process (183.49 kJ/mol) is much lower than the direct decomposition reaction of N2O=N2+O (279.05 kJ/mol). The O radical produced in this process reacts subsequently with NH3 and N2O to produce more radicals such as NH2, OH, and NO, which will take part in further reactions like NH3+OH=NH2+H2O and NH2+NO=N2+H2O until the reactants are consumed.