Photochemical oxidation of aromatic hydrocarbons leads to tropospheric ozone and secondary organic aerosol (SOA) formation, with profound implications for air quality, human health, and climate. Toluene is the most abundant aromatic compound under urban environments, but its detailed chemical oxidation mechanism remains uncertain. From combined laboratory experiments and quantum chemical calculations, we show a toluene oxidation mechanism that is different from the one adopted in current atmospheric models. Our experimental work indicates a larger-than-expected branching ratio for cresols, but a negligible formation of ring-opening products (e.g., methylglyoxal). Quantum chemical calculations also demonstrate that cresols are much more stable than their corresponding peroxy radicals, and, for the most favorable OH (ortho) addition, the pathway of H extraction by O2 to form the cresol proceeds with a smaller barrier than O2 addition to form the peroxy radical. Our results reveal that phenolic (rather than peroxy radical) formation represents the dominant pathway for toluene oxidation, highlighting the necessity to reassess its role in ozone and SOA formation in the atmosphere.