A density functional theory (DFT) study has been conducted to elucidate the mechanism of the rhodium(III)-catalyzed C-H activation of N-phenoxyacetamide, where the amido component of an internal oxidant serves as a leaving group. The impact of different substrates (alkynes versus cyclopropenes) on the reaction mechanism has been discussed in detail. The pathway for cyclopropene substrate proceeded via a Rh(V) nitrene, while Rh(III) remained unchanged throughout the pathway for alkyne substrate. The C-O bond-forming reductive elimination and O-N bond cleavage steps simultaneously occurred for the alkyne substrate. However, the C-O bond was formed by an electrocyclization from a Rh(III) intermediate for the cyclopropene substrate. The energy profiles for the cyclopropene substrate were accompanied by a change in spin-state because the triplet spin state of a Rh(V) nitrene complex is lower than that of the singlet spin state.