The mechanism of the recently described N→C direction peptide synthesis through silver‐promoted coupling of N‐protected amino acids with thioacetylated amino esters was explored by using density functional theory. Calculation of the potential energy surfaces for various pathways revealed that the reaction proceeds through silver‐assisted addition of the carboxylate to the thioamide, which is followed by deprotonation and silver‐mediated extrusion of sulfur as Ag2S. The resulting isoimide is the key intermediate, which subsequently rearranges to an imide through a concerted pericyclic [1,3]‐acyl shift (O–sp2N 1,3‐acyl migration). The proposed mechanism clearly emphasises the requirement of two equivalents of AgI and basic reaction conditions, which is in full agreement with the experimental findings. Alternative rearrangement pathways involving only one equivalent of AgI or through O–sp3N 1,3‐acyl migration can be excluded. The computations further revealed that peptide couplings involving thioformamides require significant conformational changes in the intermediate isoformimide, which slow down the rearrangement process.