Density functional theory calculations are used to study the reaction mechanism and origins of high stereoselectivity in chiral guanidine-catalyzed asymmetric 1,4-addition of 5H-oxazol-4-ones. The reaction involves proton abstraction of 5H-oxazol-4-one, C—C bond formation, and proton transfer. N1 atom of chiral guanidine exchanges its character as base and acid to activate 5H-oxazol-4-one and to facilitate the product formation. The role of N2—H2 is not only H-bond donor for 5H-oxazol-4-one but also electron accepter for N1. The enantioselectivity related with rate-limiting step 1 and Z/E selectivity determined in step 2 are primarily influenced by a five to six-membered ring link in the backbone of chiral guanidine. The reaction proceeds along the favorable path with smaller rotations of the linked bonds. The enantioselectivity is improved with guanidine involving an electron-deficient and bulky substituent. With methyl ether-protected hydroxy in structure, the catalytic ability and enantioselective control of guanidine are extraordinarily low, affording the opposite enantiomer as major product. Z-isomers are preferred in all cases. © 2013 Wiley Periodicals, Inc.