The reaction mechanism and the substituent effects of a base‐free and catalyst‐free synthesis of functionalized dihydrobenzoxazole have been investigated in detail by using the density functional theory (DFT) method. The calculated results reveal that the whole reaction should occur through three processes, and the initial intramolecular nucleophilic attack reaction is the rate‐determining step. The possibility to afford crossover reaction products has been carefully excluded based on the extremely high barrier, which is well‐consistent with the experimental results that the crossover products cannot be observed. The substituent effects have been studied through exploring the correlation of the experimental yields and the theoretically predicted barriers, which proves that the more electron‐donating substituents of the imine should be more beneficial to the occurrence of the reaction.