Computational calculations have been used successfully to explain the reactivity of the >C=P- functionality in pyrido-annelated 1,3-azaphospholes. Theoretical investigation at the Density Functional Theory (DFT) level shows that the lone pair of the bridgehead nitrogen atoms is involved in extended conjugation, due to which electron density increases considerably in the five-membered azaphosphole ring. The electron density in the azaphosphole is further enhanced by the presence of an ester group at the 3-position making the >C=P- functionality electron-rich. Thus, 1,3-azaphospholo[5,1-a]pyridine, i.e., 2-phosphaindolizine having ester group at the 3-position only does not undergo Diels-Alder (DA) reaction with an electron rich diene, such as 2,3-dimethyl-1,3-butadiene (DMB). However, an ester group at 1-position acts as electron-sink, due to which transfer of the electron density to the >C=P- moiety is checked and DA reaction occurs across the >C=P- functionality. The coordination of the Lewis acid to the carbonyl group at the 3-position raises the activation barrier, while it is lowered remarkably when it is coordinated to the P atom. Furthermore, the attack of 1,3-butadiene on the Si face of the P-coordinated (o-menthoxy)aluminum dichloride complex is a lower activation energy path. Fukui functions could be used to explain relative reactivities of indolizine and 2-phosphaindolizine towards electrophilic substitution reactions.