The reactive bond orbital (RBO) method (Hirao, Chem Phys Lett 2007, 443, 141) is extended and applied to the Diels-Alder reaction between 1,3-butadiene and ethylene, with the aim of understanding the nature of their interaction. The roles of distortion, electrostatic, exchange, polarization, and charge transfer (CT) interaction energies at the transition state of the reaction are evaluated by means of RBO energy decomposition analysis. The effects of the hypothetical interactions on electron density redistribution are also identified by analysis based on the RBO method. CT is shown to play essential roles in the new bond formation between the reacting molecules and their internal bond order alterations. However, each of the CT interactions from butadiene to ethylene and from ethylene to butadiene does not necessarily contribute to the bond-order alteration process effectively. A state correlation diagram approach based on the RBO method is also proposed, and its usefulness in understanding the origin of the barrier in the Diels-Alder reaction is demonstrated.