We present a theoretical investigation on the nature of the monomer insertion step in the allylnickel(II)-catalyzed 1,4-polymerization of 1,3-butadiene that employed a gradient-corrected DFT method. We have explored critical elementary steps of the whole polymerization cycle for the trans-1,4 regulating cationic allylnickel(II) [RC3H4NiII(C4H6)L]+ catalyst. These steps are i) cis-butadiene insertion into either the eta 1-sigma-butenyl-NiII bond (sigma-allyl insertion mechanism) or the eta 3-pi-butenyl-NiII bond (pi-allyl insertion mechanism) along with competing pathways for generation of trans-1,4 and cis-1,4 polymer units, and ii) anti-syn isomerization. Based on the analysis of geometric and electronic structures of key species involved and the energetics, we present a detailed insight into the different nature of the monomer insertion step according to the two mechanistic alternatives. An understanding of why the pi-allyl insertion mechanism is favored over the sigma-allyl insertion mechanism is provided. eta 1-sigma-butenyl-NiII Species are predicted to be sparsely populated and also distinctly less reactive than eta 3-pi-butenyl-NiII species. Although they are commonly believed to be reactive intermediates, eta 1-sigma-butenyl-NiII species are, therefore, not likely to be involved along viable pathways for cis-butadiene insertion into the butenyl-NiII bond. The present investigation corroborates our previous conclusion that the pi-allyl insertion mechanism represents the preferred mechanism for the monomer insertion step in the allylnickel(II)-catalyzed 1,4-polymerization of 1,3-butadiene. On the other hand, the suggested alternative sigma-allyl insertion mechanism has to be considered to be not operative, for both thermodynamic and kinetic reasons. Furthermore, the sigma-allyl insertion mechanism would neither provide a rationalization of cis-trans selectivity nor of chemoselectivity in the allylnickel(II)-catalyzed 1,4-polymerization of 1,3-butadiene.