The mechanism of the [(Cp*MCl2)2] (M=Rh, Ir)-catalyzed oxidative annulation reaction of isoquinolones with alkynes was investigated in detail. In the first acetate-assisted CH-activation process (cyclometalated step) and the subsequent mono-alkyne insertion into the MC bonds of the cyclometalated compounds, both Rh and Ir complexes participated well. However, the desired final products, dibenzo[a,g]quinolizin-8-one derivatives, were only formed in high yield when the Rh species participated in the final oxidative coupling of the CN bond. Moreover, a RhI sandwich intermediate was isolated during this transformation. The iridium complexes were found to be inactive in the oxidative coupling processes. All of the relevant intermediates were fully characterized and determined by single-crystal X-ray diffraction analysis. Based on this mechanistic study, a RhIII→RhI→RhIII catalytic cycle was proposed for this reaction.