The rhodium-catalyzed formal C(sp3)H activation/spiroannulation of α-arylidene pyrazolones with alkynes was investigated by means of density functional theory calculations. The calculations indicate that the spiroannulation through the proposed CC reductive elimination is kinetically unfeasible. Instead, the CC coupling from the eight-membered rhodacycle was proposed to account for the experimental results. The overall catalytic cycle consists of six steps: (1) the keto-enol isomerization; (2) the OH deprotonation, (3) the C(sp2)H bond cleavage; (4) the migratory insertion of alkyne into the RhC bond; (5) the CC coupling and (6) the regeneration of the active catalyst.