Oxidative addition of aryl iodides ArI (Ar = (a) C6H5, (b) C6H4CF3, (c) C6H3(CF3)(2), (d) C6H4CH3, (e) C6H4OCH3), to the PCP-type complex Rh(PPh3)[CH2C6H(CH3)(2)(CH2PPh2)2] (1), yields the complexes Rh(Ar)[CH2C6H(CH3)(2)(CH2PPh2)(2)](I) (2a-e). Compounds 2a-e undergo intramolecular methylene transfer from the bis-chelating ligand to the incoming aryl under mild conditions (room temperature) giving Rh(CH2-Ar)[C6H(CH3)(2)(CH2PPh2)(2)](I) (3a-e). The methylene transfer, which is a unique sequence of sp(2)-sp(3) C-C bond reductive elimination and sp(2)-sp(3) C-C bond activation, was investigated kinetically (reaction 2a --> 3a), yielding the activation parameters Delta H-double dagger = 17 +/- 3 kcal/mol, Delta S-double dagger = -23 +/- 4 eu. The rate-determining step of this reaction is the C-C reductive elimination rather than the C-C activation step. X-ray structural analysis of 2a and 3b demonstrates that the Rh atom is located in the center of a square pyramid with the aryl (2a) and the benzyl (3b) trans to the vacant coordination site. Reaction of the complex Rh(CH2C6H4CF3) [C6H3(CH2PPh2)(2)](Br) (7c) with carbon nucleophiles (MeLi, PhLi, BzMgCl) leads to a competitive sp(2)-sp(3) and sp(3)-sp(3) C-C coupling, resulting in migration of a methylene or benzylidene into the bis-chelating ring and formation of the corresponding organic products. sp2--sp3 C_C coupling was shown to be kinetically preferred over the sp(3)-sp(3) one, and the more electron-rich the benzyl ligand, the better the migratory aptitude observed. X-ray structural analysis of two benzyl migration products, complexes Rh(PPh3)[CH(C6H4CF3)C6H3(CH2PPh2)(2)] (11) and Rh(PPh3)[CH(C6H5)C6H(CH3)(2)(CH2PPh2)(2)] (16), demonstrates that the rhodium atom is located in the center of a square planar arrangement where the PPh3 ligand occupies the position trans to the methyne carbon of the benzylidene bridge. The methylene and benzylidene migration reaction is an important transformation for the regeneration of the methylene-donating moiety in the methylene-transfer process.