The mechanism of reaction between azacyclopropenylidene and azetidine has been systematically investigated employing the second-order Møller-Plesset perturbation theory (MP2) method to better understand the azacyclopropenylidene reactivity with azetidine four-membered cycle. Geometry optimization, vibrational analysis, and energy properties for the involved stationary points on the potential energy surface have been calculated. It was found that at the first step of this reaction, azacyclopropenylidene can insert into azetidine cycle at its C-N or C-C bond to form spiro intermediate IM. It was found that azacyclopropenylidene insertion into C-N bond is easier than into C-C bond. Through the ring-opening step at C-C bond of azacyclopropenylidene fragment, IM can transfer to product P1, which is named as pathway (1). On the other hand, through the H-transferred step and subsequent ring-opened step at C-N bond of azacyclopropenylidene fragment, IM can turn into product P2, which is named as pathway (2). From the thermodynamics viewpoint, P2 allene is the dominating product. From the kinetic viewpoint, the pathway (1) of formation to P1 is primary.