This study represents an experimental and computational approach to investigate the rhodium‐catalyzed one‐pot synthesis of dihydrobenzofuran‐4‐one (DBF) and spiro[2.5]oct‐1‐ene (SOE) derivatives. Density functional theory (DFT) calculations were performed at B3LYP and M06‐2X level theory. For mechanistic studies, the calculation employing B3LYP/GenECP/LanL2DZ/6‐311++G(d,p) level of theory demonstrated that a [3 + 2] cycloaddition reaction between diazo compound and phenylacetylene (PhA) proceeds through a two‐step mechanism via a barrierless and highly exergonic process with relative free energy 73.61 kcal/mol to yield the kinetically favored DBF derivatives (50%–62.5%). In contrast, the assemble of SOE derivatives follows [2 + 1] cycloaddition between in situ generated cyclohexane‐1,3‐dione carbene‐2 and PhA, with the potential energy barrier 4.41 kJ/mol. Thermochemistry calculation disclosed that the cycloaddition reactions are spontaneous, and DBF (6a) is thermodynamically more stable than its constitutional isomer SOE (7a) by 42.59 kcal/mol. However, natural bond orbital (NBO), HOMO–LUMO energy gaps (4.62–4.89 eV), dipole moments, polarizability, first‐order hyperpolarizability, and global reactivity descriptors were calculated to understand products' structural features. Additionally, Merck Molecular Force Field (MMFF94), followed by the B3LYP level of theory, was applied to predict the relative stability for the various conformations of 6b and 7b. The Boltzmann weighted average 1H chemical shift computed by GIAO‐B3LYP/6‐311+(2d,p) method and UV‐Vis absorption calculated using time‐dependent density functional theory (TD‐DFT) agree with experimental results. Finally, the synthesis of DBF and SOE derivatives is herein illustrated.