The microwave-promoted three-component reaction between o-nitrochalcones, primary amines and β-dicarbonyl compounds in the presence of Ce(IV) ammonium nitrate constitutes the first example of a multicomponent carbazole synthesis. This reaction furnishes highly substituted and functionalized carbazole derivatives via a double annulation process that generates two C-C and two C-N bonds, with water as the only side product. Mechanistically, this transformation has some unusual features that include an intramolecular coupled hydrogenation-dehydrogenation process, the functionalization of a C-H group by direct attack onto a nitrogen function and a CAN-catalyzed reduction via hydride transfer from ethanol. The mechanisms of these reactions were studied with the aid of computational techniques.