Previously, we developed a gold-catalyzed cycloisomerization of dienediynes to synthesize the fused 6,7,5-tricyclic compounds. This reaction involves aliphatic C-H functionalization under mild conditions with high regio- and diastereoselectivities. Herein, we present a combined density functional theory (DFT) and experimental study to understand its mechanism. The reaction starts with a 6-endo-dig cyclization to generate a cis-1-alkynyl-2-alkenylcyclopropane. Then, a Cope rearrangement takes place to give a seven-membered-ring allene intermediate, whose central carbon atom possesses vinyl cation character and thus is highly reactive toward aliphatic C-H insertion. After the C-H insertion, two successive [1,2]-hydride shifts then occur to give the tricyclic product and to complete the catalytic cycle. Notably, steric effect induced by the bulky ligand is found to be important for the diastereocontrol in the C-H insertion step. DFT calculations suggested that the malonate-tethered substrate utilized in our previous work may undergo an undesired 5-exo-dig cyclization under gold catalysis, which could be the reason why the desired fused 6,7,5-tricarbocyclic product was not generated. These mechanistic insights then guided us to design substrates with a shortened carbon tether in the present work to inhibit the exo-dig cyclization so that the tandem cyclopropanation/Cope rearrangement/C-H functionalization could occur to construct polycarbocycles containing a seven-membered ring. This prediction was supported by new experiments, providing a new strategy to access fused 5,7,5-tricyclic and 5,7,6,6-tetracyclic carbocycles. In addition, how the substituents affect the chemoselectivity was also investigated.