The mechanism of the Kinugasa reaction, that is, the copper-catalyzed formation of β-lactams from nitrones and terminal alkynes, is re-evaluated by means of density functional theory calculations and in light of recent experimental findings. Different possible mechanistic scenarios are investigated using phenanthroline as a ligand and triethylamine as a base. The calculations confirm that after an initial two-step cycloaddition promoted by two copper ions, the resulting five-membered ring intermediate can undergo a fast and irreversible cycloreversion to generate an imine and a dicopper-ketenyl intermediate. From there, the reaction can proceed through a nucleophilic attack of a ketenyl copper intermediate on the imine and an intramolecular cyclization, rather than through the previously suggested (2 + 2) Staudinger synthesis.