Oxazolidinones can be synthesized through an organocatalytic cascade reaction of stable sulfur ylides and nitro-olefins. This process, sequentially catalyzed by thiourea and N,N-dimethylaminopyridine (DMAP), is theoretically studied using density functional theory by the continuum solvation model. It is shown that the rate- and stereoselectivity-determining step is the addition reaction of sulfur ylide to the nitro-olefin with two competing reaction channels. One channel is where the nitro-cyclopropane is generated first and then converted into isoxazoline N-oxide through a DMAP-catalyzed rearrangement. The other channel is the direct generation of the isoxazoline N-oxide intermediate. DMAP plays an important role in the reaction as a nucleophilic catalyst. The mechanism for the important rearrangement reaction proposed by Xiao et al. (J. Am. Chem. Soc. 2008, 130, 6946-6948) is not appropriate as the reaction energy barrier is too high; a 10-step mechanism determined by our theoretical calculations is more feasible as the energy barrier is becoming much less than that by Xiao. It is the first time that the Hofmann rearrangement involved in the cascade organocatalysis is confirmed by theoretical calculations. Our result of the stereoselectivity for the synthesis of oxazolidinones is in good agreement with the experiment.