The migratory insertion of isonitriles into a metal–C bond is a potentially important method for C–C bond construction in organic and pharmaceutical syntheses. In this context, the reaction mechanism of Cp*(Cl)Hf(diene) (Cp* = pentamethylcyclopentadienyl) with isonitriles was studied using density functional theory calculations. Hf-imido complexes and α-methylene cyclopentenimines are the confirmed products for N-tert-butyl- or N-1-adamantyl-substituted isonitriles. They are also the thermodynamically favored products of N-2,6-dimethylphenyl (Ar)-substituted isonitriles. The β-H elimination reaction pathway is responsible for the formation of α-methylene cyclopentenimines. Its elementary reactions include the isomerization of Cp*(Cl)Hf(diene), migratory insertion of the first isonitrile into the Hf–C bond, C–C reductive elimination, β-H elimination, migratory insertion of the second isonitrile into the Hf–H bond, C–C reductive coupling, addition of a Hf–H bond, and fragmentation of the six-membered hafnacycle. For methyl-, ethyl-, and Ar-substituted isonitriles, the kinetically favored products are diazahafnacyclopentanes (“σ complexes”). These are formed via an isomerization reaction pathway that comprises isomerization of the Hf complex, C–C reductive coupling, and insertion of a CN bond. The effects of different substituents on the isonitrile nitrogen on the main elementary reactions are discussed.