The rhodium-catalyzed highly regioselective 1:2 coupling of aldehydes and allenes was investigated by means of density functional theory calculations. Full free energy profiles were calculated, and several possible reaction pathways were evaluated. It is shown that the energetically most plausible catalytic cycle is initiated by oxidative coupling of the two allenes, which was found to be the rate-determining step of the overall reaction. Importantly, Rh allyl complexes that are able to adopt both eta(3) and eta(1) configurations were identified as key intermediates present throughout the catalytic cycle with profound implications for the selectivity of the reaction. The calculations reproduced and rationalized the experimentally observed selectivities and provided an explanation for the remarkable alteration in the product distribution when the catalyst precursor is changed from [RhCl(nbd)](2) (nbd = norbornadiene) to complexes containing noncoordinating counterions ([Rh(cod)(2)X]; X = OTf, BF4, PF6; cod = 1,5-cyclooctadiene). It turns out that the overall selectivity of the reaction is controlled by a combination of the inherent selectivities of several of the elementary steps and that both the mechanism and the nature of the selectivity-determining steps change when the catalyst is changed.