Previously we reported the redox-neutral atom economic rhodium catalyzed coupling of terminal alkynes with carboxylic acids using the DPEphos ligand. We herein present a thorough mechanistic investigation applying various spectroscopic and spectrometric methods (NMR, in situ-IR, ESI-MS) in combination with DFT calculations. Our findings show that in contrast to the originally proposed mechanism, the catalytic cycle involves an intramolecular protonation and not an oxidative insertion of rhodium in the OH bond of the carboxylic acid. A σ-allyl complex was identified as the resting state of the catalytic transformation and characterized by X-ray crystallographic analysis. By means of ESI-MS investigations we were able to detect a reactive intermediate of the catalytic cycle.