Here we present a systematic theoretical investigation on the mechanisms of Grignard reagent formation (GRF) for CH₃Cl reacting with Mg atom, Mg₂ and a series of Mg clusters (Mg₄–Mg₂₀). Our calculations reveal that the ground state Mg atom is inactive under matrix condition, whereas it is active under metal vapor synthesis (MVS) conditions. On the other hand, the excited state Mg (³P) atom, as produced by laser-ablation, can react with CH₃Cl barrierlessly, and hence is active under matrix condition. We predict that the bimagnesium Grignard reagent, though often proposed, can barely be observed experimentally, due to its high reactivity towards additional CH₃Cl to produce more stable Grignard reagent dimer, and that the cluster Grignard reagent RMg₄X possesses a flat Mg₄ unit rather than a tetrahedral geometry. Our calculations further reveal that the radical pathway (T4) is prevalent on Mg, Mg₂ and Mg_n clusters of small size, while the no-radical pathway (T2), which starts at Mg₄, becomes competitive with T4 as the cluster size increases. A structure–reactivity relationship between barrier heights and ionization potentials of Mg_n is established. These findings not only resolve controversy in experiment and theory, but also provide insights which can be used in the design of effective synthesis approaches for the preparation of chiral Grignard reagents.