The Houk group and Wu group report density functional theory (B3LYP and M06) investigations on the mechanism of rhodium(III)-catalyzed redox coupling reaction of N-phenoxyacetamides with alkynes. The results elucidated the role of the internal oxidizing directing group, and the role of RhIII/RhI and RhIII/RhV catalysis of C–H functionalizations. A novel RhIII–RhV–RhIII cycle successfully rationalizes the recent experimental observations.