The recently reported Ni-catalyzed methylation–allylation of alkynes with allylic alcohols and AlMe₃ reagents delivers valuable tetrasubstituted alkene units in a highly regioselective fashion. Motivated by the experimental significance and the mechanistic ambiguity (e.g. the details of C–O bond activation, the function of the Lewis acid AlMe₃, etc.), we conducted a detailed mechanistic study using density functional theory (DFT) calculations. The reaction was found to occur via the C–O bond activation of allylic alcohol, allylation of alkyne, transmetalation, reductive elimination and catalyst regeneration steps. AlMe₃ could easily react with the allylic alcohol to form a cyclodialuminoxane species bearing two groups of Lewis acid–base interactions. In this regard, the C(allyl)–O bond is remarkably activated, resulting in a relatively facile C–O activation (compared to the typical Lewis-acid mediated reactions). In addition, the Al–Me interaction is a double-edged sword to the methylation step: the cyclodialuminoxane group functions as the methyl resource, while the full dissociation of the Al–Me interaction (via a cis-to-trans isomerization) is a requisite to fully release the methyl group. In this context, the “Me-relay” pathway involving the [Ni]–Me intermediate is found to be more plausible than all other mechanistic possibilities (such as the typical concerted Me-transfer mechanism in previous studies).