A general mechanism to rationalize Ru(IV) -catalyzed isomerization of the C=C bond in O-allylic substrates is proposed. Calculations supporting the proposed mechanism were performed at the MPWB1K/6-311+G(d,p)+SDD level of theory. All experimental observations in different solvents (water and THF) and under different pH conditions (neutral and basic) can be interpreted in terms of the new mechanism. Theoretical analysis of the transformation from precatalyst to catalyst led to structural identification of the active species in different media. The experimentally observed induction period is related to the magnitudes of the energy barriers computed for that process. The theoretical energy profile for the catalytic cycle requires application of relatively high temperatures, as is experimentally observed. Participation of a water molecule in the reaction coordinate is mechanistically essential when the reaction is carried out in aqueous medium. The new mechanistic proposal helped to develop a new experimental procedure for isomerization of allyl ethers to 1-propenyl ethers under neutral aqueous conditions. This process is an unique example of efficient and selective catalytic isomerization of allyl ethers in aqueous medium.