A DFT study on the palladium-bisphosphine-catalyzed hydrogenation of alkynes is presented. The theoretical study explores the feasibility of two independent mechanisms, one based on the neutral species Pd(0)(P2) (where P2 = 2PH3 or PH2CH2CH 2PH2) and the second based on cationic intermediates of the type [Pd(II)(P2)(H)]+. The paper compares the theoretical results with experimental observations obtained in a parallel NMR study. The calculations reveal that for the Pd(0) system to achieve useful catalysis a phosphine loss mechanism is necessary with subsequent binding of the alkyne to Pd(P2) being followed by phosphine loss and H2 coordination. After hydride transfer, the formation of Pd(PH3)(H)(CH= CH2) is predicted. This species is instrumental in forming Pd(P 2)(η2-CH2=CH2). Formation of Pd(P2)(H)(CH2CH3) also proceeds via phosphine loss, in this case from Pd(P2)(η2-CH 2=CH2). In contrast, the cationic mechanism involves Pd(II)(P2)(H)+, which reacts with the alkyne to form Pd(P2)(CH=CH2)+ directly. A role for Pd(P 2)(H)(η2-CH2=CH2)+ and Pd(P2)(CH2CH3)+ in both alkene isomerization and hydrogenation is established. For the cationic cycle, alkene isomerization is predicted to be facile, while reductive elimination of alkane via H2 coordination involves a higher barrier, in good agreement with experimental observations. For the neutral cycle, both alkene isomerization and alkane formation also involve alkylpalladium species such as Pd(P 2)(H)(CH2CH3), but they now correspond to high-energy processes and are predicted to be less likely. Overall calculations support for the palladium-bisphosphine systems a reaction mechanism based on cationic monohydride precursors. © 2008 American Chemical Society.