In recent years, noninnocent pyridine diimine (PDI) complexes featuring first-row transition metals have emerged as prominent catalysts, demonstrating efficacy in a diverse range of vital organometallic transformations. However, the inherent complexity of the fundamental reactivity paradigm in these systems arises from the presence of a noninnocent ligand and the multispin feasibility of 3d metals. While density functional theory (DFT) has been widely used to unravel mechanistic insights, its limitations as a single-reference method can potentially misrepresent spin-state energetics, compromising our understanding of these intricate systems. In this study, we employ extensive high-level ab initio state averaged-complete active space self-consistent field/Nelectron valence state perturbation theory (SA-CASSCF/NEVPT2) calculations in combination with DFT to investigate an iron-PDI-catalyzed [2 + 2] cycloaddition reaction of alkenes. The transformation proceeds through two major steps: oxidative cyclization and reductive elimination. Contrary to the predictions of DFT calculations, which suggest two-state reactivity in the reaction and identify reductive elimination as the turnover-limiting step, SA-CASSCF/NEVPT2-corrected results unequivocally establish a singlestate reactivity scenario with oxidative cyclization as the turnover-limiting step. SA-CASSCF/NEVPT2-based insights into electronic ground states and electron distribution elucidate the intriguing interactions between the PDI ligand and the iron center, revealing the highly multiconfigurational nature of these species and providing a precise depiction of metal−ligand cooperativity throughout the transformation. A comparative assessment of several widely recognized DFT functionals against SA-CASSCF/NEVPT2-corrected data indicates that single-point energy calculations using the modern density functional MN15 on TPSSh geometries offer the most reliable density functional methodology, in scenarios where SA-CASSCF/NEVPT2 computational cost is a consideration.