In the present work, phase transition mechanisms from semiconducting 2H phase to metallic 1T phase in MoS2 nanosheets were studied using density functional theory (DFT) method. Various 2H → 1T phase transition mechanisms that consist of nucleation and propagation steps, which were simulated by collective rotational and rotational/translational movements, single atom translational movement, and the gliding movement of one row for sulfur (S) atoms, on both the basal plane and Mo- and S-edges with different S coverages were investigated. On the perfect basal plane, the 1T phase nucleation is unlikely due to the extremely high barrier of 2.25 eV/atom, whereas the presence of defective S vacancies on the basal plane dramatically facilitate the 1T phase nucleation and propagation around the defective sites by the collective rotational movement of three S atoms. On the 2H phase basal plane with two S vacancies, the kinetic barriers for the 1T phase nucleation are as low as of 0.66–0.77 eV/atom. Like the promoting effect of S vacancies on the phase transition over the basal plane, DFT results suggest that the S coverage on the Mo- and S-edges will affect the 1T phase nucleation and propagation. The 1T phase nucleation starting with the translational movement of single S atom on the bare Mo-edge and the gliding movement of an entire row of S atoms on the S-edge with 50% S coverage are kinetically favorable. While the 1T phase formation at the Mo-edge with 50% S coverage and the S-edge with 100% S coverage are unlikely. The present work not only confirms the important role of S vacancies/coverages in the 2H–1T phase transition but also provides new insight into how and where the 2H-1T phase transition occurs at the atomic level, which also sheds light on the general phase transition mechanism for two-dimensional transition metal dichalcogenide materials.