The mechanism of the rhodium-catalyzed hydrogenation of CO2 to formic acid was investigated by initial rate measurements using the complex [(dppp)Rh(hfacac)] (A) (dppp = Ph2P(CH2)(3)PPh2, hfacac = hexafluoroacetyl-acetonate) as a catalyst precursor in DMSO/NEt3 and by ab initio calculations using cis-[(H3P)(2)Rh] as a model fragment for the catalytically active site. The kinetic data are consistent with a mechanism that involves rate limiting product formation by liberation of formic acid from an intermediate that is formed via two reversible reactions of the actual catalytically active species first with CO2 and then with H-2. The calculations provide for the first time a theoretical analysis of the full catalytic cycle of CO2 hydrogenation. They give detailed insight into the structure of possible intermediates and their transformations during the individual steps. The results suggest sigma-bond metathesis as an alternative low energy pathway to a classical oxidative addition/reductive elimination sequence for the reaction of the formate intermediate with dihydrogen.